Qualified Personal Residence Trust (QPRT): 2026 Guide and Calculator

A Qualified Personal Residence Trust (QPRT) lets you transfer your primary home or vacation home to your heirs at a fraction of its fair market value for gift tax purposes — while you continue living there rent-free for a fixed term of years. Done correctly, it is one of the most cost-efficient ways to move a high-value residence out of your taxable estate.

What is a QPRT?

A QPRT is an irrevocable trust that holds your primary residence or one vacation home. Under IRC §2702 and the regulations at Treasury Reg. §25.2702-5, you (the grantor) transfer the home into the trust and retain the right to live there for a fixed period — the "term." At the end of the term, the home passes automatically to the remainder beneficiaries (typically your children) with no additional gift tax.²

The tax benefit comes from IRC §7520 actuarial tables: because you retain the right to use the home for the term, the IRS values your gift as only the remainder interest — what the home will be worth at the end of the term, discounted back to today using the §7520 interest rate. The higher the rate, the greater the discount, and the lower the taxable gift.

QPRT Calculator

Estimate your taxable gift and estate tax savings. The calculation uses IRS §7520 tables (term-certain remainder factor = 1/(1+r)^n).

How a QPRT works — step by step

1. Grantor creates and funds the trust. You transfer your primary residence (or one vacation home) into an irrevocable trust — a QPRT — by deed. The trust document names the remainder beneficiaries (typically your children) and specifies the term length.
2. Gift tax return is filed. The transfer is a completed gift of the remainder interest. You report it on Form 709 (Gift Tax Return) and consume that amount of your lifetime exemption. If the gift value is under your remaining exemption, no gift tax is owed — just exemption consumed.
3. Grantor lives in the home rent-free during the term. You retain the right to use the property as your personal residence for the entire term period. You pay property taxes, maintenance, and insurance — no rent to the trust.
4. Term expires — two possible outcomes:
   • Grantor survives the term: the home passes automatically to the remainder beneficiaries. It is permanently outside your taxable estate. If you want to continue living there, you must pay fair-market rent to the children (or the trust if it continues). Those rental payments further reduce your estate by shifting cash to the next generation.
   • Grantor dies during the term: the home is pulled back into your gross estate at its full fair-market value under IRC §2036(a)(1) — as if no QPRT was created. Any gift tax exemption consumed is released back (no gift tax cost). The QPRT fails, but the estate is no worse off than if the QPRT had never been set up.

Worked example: $2.5M primary residence, 10-year term

Margaret, age 65, owns a primary residence worth $2,500,000 in 2026. She transfers it to a QPRT with a 10-year term. The §7520 rate for May 2026 is 5.00%.³

At 3.5% appreciation the QPRT is marginally negative (savings slightly less than exemption consumed). At 5% appreciation or higher, it turns positive. The QPRT is most powerful in markets with strong price appreciation or for homes already well above basis. Values assume grantor survives 10-year term.

In addition: once Margaret survives the term, she pays fair-market rent to her children — say $5,000/month ($60,000/year). Over 10 more years of living in the home, that is $600,000+ transferred to the next generation with no gift tax — further reducing her estate while providing the children with taxable income. The rent payments are a second-order benefit that makes the QPRT more attractive than the calculator above shows.

Choosing the right term length

The term is the central design variable in a QPRT. Longer terms produce a smaller taxable gift (lower exemption consumption) but increase the mortality risk of not surviving the term.

§7520 rate 5.00%, May 2026 (IRS Rev. Rul. 2026-9). Remainder factor = 1/(1.05)^n per IRS Table B.

The post-term rent requirement

When the QPRT term expires and the home passes to the children, the grantor no longer has a legal right to occupy the property. To avoid IRC §2036 inclusion — which would pull the home back into the grantor's estate if they retain the right to live there — the grantor must pay fair-market rent to the new owners if they wish to continue living in the home.

This rental arrangement has a secondary planning benefit: rent payments are taxable income to the children and reduce the grantor's estate without gift tax. For a grantor in the 37% income tax bracket and children in a lower bracket, the after-tax cost of rent is further reduced by the differential. Effective estate tax planning often targets a scenario where the grantor pays rent from assets that would otherwise be in their estate — converting a taxable estate asset into rental income to the next generation.

The rent must be at arms-length fair market value — the same rent a third-party tenant would pay for a comparable property. Underpaying rent risks IRS challenge under §2036. Document with a lease agreement and periodic rent reviews.

Vacation home QPRT — IRC §2702(a)(3)(A)(ii)

A QPRT can hold one vacation home in addition to (or instead of) the primary residence, but only one of each. You can have at most two QPRTs at any time: one for your primary residence, one for a vacation property.⁴

The rules for a vacation home QPRT are the same as for a primary residence: the grantor must use the property as a personal residence during the term (satisfying the personal-use days test for the vacation home). The property cannot be rented out for profit during the QPRT term — it must be a personal residence, not an investment property, while the trust is in effect.

Common structure: use two separate QPRTs — one for the primary home, one for the Nantucket or Aspen retreat. Each is structured independently with potentially different term lengths based on the property's value, appreciation potential, and the grantor's risk tolerance for losing each specific property via early death.

QPRT vs. alternatives

Post-OBBBA: is a QPRT still worth it?

With the federal estate tax exemption permanently set at $15M per individual ($30M per married couple) under the OBBBA, QPRTs are less urgent than they were during the pre-OBBBA "sunset window" planning. But they remain valuable in several scenarios:

• Total estate above $30M. A married couple with $35M in combined net worth will owe estate tax at 40% on roughly $5M — $2M in federal estate taxes. A QPRT on a $3M–$5M home removes a significant slice of taxable estate.
• Appreciated real estate with future growth potential. A beach house purchased for $400K now worth $2.5M that you expect to reach $5M in 10 years is an excellent QPRT candidate. The estate tax savings at the appreciated value far exceed the current gift tax cost.
• State estate tax exposure. If you live in Massachusetts, New York, Oregon, or another estate-tax state, the state exemption may be $1M–$7M — much lower than the federal $15M. A QPRT removes the home from the state taxable estate as well as the federal. See: State Estate Tax 2026 Guide.
• Combined planning strategies. If you've already used most of your $15M federal exemption on a SLAT or IDGT installment sale, a QPRT lets you remove additional value from your estate at a discounted gift tax cost without competing for the same exemption dollar.

Common QPRT mistakes

1. Setting too long a term for the grantor's health. A 75-year-old in poor health who sets a 20-year QPRT has almost no probability of surviving the term. The QPRT will fail at death, the home returns to the estate, and the family gains nothing. The term must be calibrated to the grantor's realistic life expectancy, not the maximum discount.
2. Failing to pay rent after term expiration. If the grantor continues living in the home after the term ends without paying fair-market rent, the IRS can argue the grantor retained a §2036 right to the property — pulling the full appreciated value back into the gross estate. Get a lease in place the day after the term expires.
3. Ignoring the carryover basis trap. Heirs inherit the home at the grantor's original cost basis, not the FMV at death. If the home was purchased for $300K and is worth $3M when inherited, heirs who sell face a $2.7M gain taxed at 20% capital gains + 3.8% NIIT. This can easily exceed the estate tax saved by the QPRT in low-appreciation, low-estate-tax scenarios. Model both outcomes before committing.
4. Transferring a mortgaged property. If the home carries a mortgage, the transfer to the QPRT is treated as a part-sale, part-gift for tax purposes — the mortgage assumed by the trust reduces the gift value, but may trigger complex basis calculations and possibly gain recognition. Ideally, pay off (or refinance out of) any mortgage before funding the QPRT.
5. Not coordinating the QPRT with the revocable living trust. Many HNW individuals hold their primary home in a revocable living trust for probate avoidance. To fund a QPRT, the home must be removed from the revocable trust and titled in the QPRT directly. The revocable trust cannot hold the QPRT interest — the QPRT is its own irrevocable trust.
6. Trying to use a QPRT for investment property. IRC §2702(a)(3)(A) limits QPRTs to personal residences. A rental property, commercial real estate, or any property that is not your personal residence (or one vacation home) does not qualify. Attempting to use a QPRT for investment property fails the statutory test. Consider an IDGT installment sale instead. See: Trust Strategies Guide.

Sources

1. IRS — Tax Year 2026 Inflation Adjustments (OBBBA) (federal estate/gift tax exemption $15,000,000 for 2026; OBBBA made permanent, signed July 4, 2025)
2. 26 U.S.C. § 2702 — Special valuation rules in case of transfers of interests in trusts (IRC §2702: QPRT as exception to zero-value retained interest rule; qualified personal residence trust definition under §2702(a)(3)(A))
3. IRS Rev. Rul. 2026-9, Internal Revenue Bulletin 2026-19 (§7520 applicable federal rate for May 2026: 5.00%; used for valuing retained interests in QPRTs and other split-interest trusts)
4. 26 CFR § 25.2702-5 — Personal residence trusts (Treasury Regulation: QPRT requirements; one primary residence + one vacation home limitation; personal-use test; prohibited transfers during term; post-term rental requirement)

Values verified as of May 2026: federal estate/gift tax exemption $15,000,000 (OBBBA, IRS 2026 adjustments); §7520 rate 5.00% for May 2026 per IRS Rev. Rul. 2026-9 (IRB 2026-19); QPRT rules per IRC §2702(a)(3)(A) and Treasury Reg. §25.2702-5 (stable since OBRA 1990); primary-residence capital gain exclusion $500K/MFJ per IRC §121.