A qualified personal residence trust has which of the following results?

A qualified personal residence trust has which of the following results?

• A. The grantor may continue to live in the residence.
• B. If the grantor survives the term of the trust, gift tax is due at termination.
• C. The shorter the term of the trust, the greater the discount for gift tax purposes.
• D. At termination, the property reverts back to the grantor.

Answer: (A)

The key idea here is that a Qualified Personal Residence Trust lets you move your home into a trust while you keep the right to live there for a set period. Because you retain occupancy, the gift of the home to your heirs is valued at less for gift tax purposes. That retained right to live in the residence during the term is what lowers the taxable value of the transfer. So, the statement that the grantor may continue to live in the residence is the defining result. After the term ends, ownership passes to the beneficiaries, not back to the grantor. The length of the term affects the amount of the discount—longer terms give a bigger discount, shorter terms give a smaller one—so the option describing continued residency aligns with how the trust works.

The key idea here is that a Qualified Personal Residence Trust lets you move your home into a trust while you keep the right to live there for a set period. Because you retain occupancy, the gift of the home to your heirs is valued at less for gift tax purposes. That retained right to live in the residence during the term is what lowers the taxable value of the transfer.

So, the statement that the grantor may continue to live in the residence is the defining result. After the term ends, ownership passes to the beneficiaries, not back to the grantor. The length of the term affects the amount of the discount—longer terms give a bigger discount, shorter terms give a smaller one—so the option describing continued residency aligns with how the trust works.