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How to use an international property to reduce estate taxes

When it comes to managing estate taxes in Massachusetts, exploring strategic options is key. One avenue worth considering is leveraging a qualified personal residence trust by incorporating a property situated in another country.

This strategy is sometimes viable for new citizens or those with ties to family overseas.

Definition of qualified personal residence trust

A qualified personal residence trust is a legal arrangement designed to help individuals manage their estate and reduce estate taxes. It allows them to transfer their primary residence or vacation home into the trust while retaining the right to live in the property for a specified period. At the end of this predetermined term, the property goes to the beneficiaries the trust names.

Key features of QPRT

A few features of QPRT are important to keep in mind. For example, after transferring the property, individuals cannot undo the transfer or reclaim ownership of the property. Retained interest allows them to continue residing in the home during the trust period. At the end of the trust term, the transfer of residual interest ensures that the property passes to the chosen heirs.

Estate tax implications in Massachusetts

By transferring a home into a QPRT, the value of the property for estate tax purposes may decrease. This reduction can contribute to a lower taxable estate. It also allows individuals to leverage certain estate tax exclusions and deductions, optimizing their estate planning strategy.

International property in QPRT

Including a property located abroad in a QPRT can have estate tax benefits for Massachusetts residents. By placing an overseas property in the trust, they can reduce its value for estate tax calculation purposes. Doing so also provides a level of diversification to the trust, potentially enhancing its value.

For those with cherished family properties overseas, a QPRT allows them to preserve the legacy and pass it on to future generations while optimizing estate tax implications. However, it is necessary to ensure that the trust structure complies with the laws of both the foreign country and Massachusetts.


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