Using Qualified Personal Residence Trusts (QPRTs) to Protect Your Family Home

For many families in Naperville and DuPage County, home means more than simply where they live. It is a place filled with memories, traditions, and a sense of stability. When planning for the future, many clients want to ensure that this home remains in the family while also reducing estate tax exposure. One of the most effective tools for accomplishing this is a Qualified Personal Residence Trust (QPRT).

A QPRT allows you to transfer your home to your beneficiaries at a reduced tax cost while still living in it for a set period of time. Although the concept may sound technical, the benefits can be significant, especially for homeowners with high-value properties. 

Whether a QPRT is right for you will depend on your unique situation. To learn more, call our Naperville, IL estate planning attorney today.

What Is a Qualified Personal Residence Trust?

A Qualified Personal Residence Trust is a type of irrevocable trust, which means that once it is created, you cannot simply change your mind and revoke it. The purpose of a QPRT is to remove the value of your home from your taxable estate, lowering potential estate taxes when you pass away.

Here is how it works. First, you transfer ownership of your residence into the trust. Then, you keep the right to live in the home for a set number of years, known as the “retained interest” period. At the end of that period, ownership of the home passes to your beneficiaries, who are usually your children.

By transferring the home into a QPRT, the gift value is reduced because you are keeping the right to live there for a time. That reduction lowers the amount that counts against your lifetime gift and estate tax exemption.

Should We Consider a Qualified Personal Residence Trust?

For families with significant assets, estate taxes can take a large portion of wealth before it reaches the next generation. Even though the federal estate tax exemption is nearly $14 million per individual in 2025, Illinois also has its own estate tax, with an exemption of only $4 million.

This makes QPRTs especially valuable for Illinois homeowners who want to preserve a high-value residence for their heirs. By shifting the home out of your estate at a reduced tax cost, you can save your family significant money while ensuring the property’s ownership stays where you want it.

How the Tax Benefits of a Qualified Personal Residence Trust Work

The IRS values the gift of your home to the trust based on several factors, including the current fair market value of the property, the length of the trust term, and applicable interest rates. Because you keep the right to live there for a set number of years, the gift value is discounted.

For example, if your Naperville home is worth $1 million and you set up a 10-year QPRT, the taxable value of the gift might be only $600,000, depending on interest rates. That means you have effectively moved a $1 million asset out of your estate at a reduced tax cost. If the home appreciates during the trust term, that growth also avoids estate taxes.

What Happens After the Qualified Personal Residence Trust Term Ends?

When the QPRT term ends, your children (or other named beneficiaries) become the legal owners of the home. If you want to continue living there, you can usually rent the property back from them at fair market value. This has an added benefit: the rent payments reduce your taxable estate further without using additional gift tax exemption.

However, if you pass away before the trust term ends, the home returns to your estate and is subject to estate tax. For that reason, selecting the right trust term is crucial.

Choosing the Right Qualified Personal Residence Trust Term Length

Deciding how many years to set for the QPRT requires careful planning. A longer term results in a greater tax discount, but it also increases the risk that you may pass away before the term ends. A shorter term reduces risk but provides less tax benefit.

Factors to consider include your current age and health, as well as the expected appreciation of your home’s value. You should also think about your long-term housing plans and your overall estate size and tax exposure. This is where experienced legal guidance is essential. An estate planning lawyer with decades of practice can help balance these factors to design a strategy tailored to your family’s unique needs.

Risks and Considerations for People Thinking About a Qualified Personal Residence Trust

While QPRTs can be powerful tools, they are not right for everyone. Some important considerations include:

• Loss of control: Once the home is in the trust, you cannot sell or refinance it without following the trust’s rules.
• Early death: If you pass away during the trust term, the estate tax benefit is lost.
• Children’s ownership: After the term, the home belongs to your children. If they sell it, the proceeds are theirs, not yours.
• Property taxes and maintenance: You must continue to pay these costs while living in the home.

These risks underscore the importance of thoughtful planning and clear communication with your beneficiaries.

Qualified Personal Residence Trusts in Illinois Estate Planning

Because Illinois has its own estate tax with a lower exemption, QPRTs can play an especially important role for local families. A Naperville residence that has appreciated over decades may be worth far more than when it was purchased. That value, combined with other assets such as retirement accounts or life insurance, can quickly push an estate over the $4 million state exemption threshold.

Using a QPRT can reduce or even eliminate the Illinois estate tax on a family home. For many clients, this means their children can keep the property without being forced to sell to cover a tax bill.

Contact a Naperville, IL Estate Planning Attorney

Your family home represents more than bricks and mortar. It is part of your legacy. If you are considering a Qualified Personal Residence Trust, speak with a Naperville, IL estate planning lawyer at Gierach Law Firm, LLC who has the knowledge and experience to guide you. 

With more than 30 years of practice and the perspective of a business owner, we can help you preserve your family’s home while navigating the complex rules of tax and trust law. Call 630-756-1160 to learn how to make this strategy work for you.