Often, some of the trickiest estate planning conundrums come from people who have many assets and a large, complex family. These people often find that they need to carefully utilize several different estate planning tools in order to ensure that their assets are properly divided amongst their children and other family members.
It seems as though single people, without a spouse or children, should have a simpler time with their estate planning. This is not always the case, however. For one thing, single people do not have access to all of the valuable tax-saving estate planning strategies that are available to married couples. Therefore, single people who wish to protect themselves from tax penalties may wish to consider a slightly more complex option.
A Qualified Personal Residence Trust, or QPRT, is an estate planning technique that allows single people to avoid part of the infamous gift tax. QPRTs are a type of trust that is used to transfer ownership of the grantor's most valuable asset: his or her home.
When a QPRT is created, the grantor's home (and vacation home, if the grantor wishes to establish a second QPRT) is placed in a trust. By deferring the official transfer of ownership, the grantor can see significant tax savings when the term of the trust is up. However, the process does come with one caveat: if the grantor dies before the trust period has been completed, then the QPRT will be invalid, and all possible tax savings will evaporate. Thus, creating a QPRT could be viewed as slightly risky.
There are many different techniques and tools that a person may wish to utilize when dividing their estate. Given the complexity of the process, it is often advisable to speak with an estate planning attorney, who can assist with both the creation of the necessary documents and with determining the best way to avoid undue taxation.
Source: The Epoch Times, "Estate Planning Techniques for the Single Testator," Arleen Richards, Jan. 28, 2013