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Finance: What is QPRT? 1 Views
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Transcript
- 00:00
and finance Allah shmoop What is a Q Bert No
- 00:06
Q P Artie What is it Qualified Personal resident's trust
- 00:11
and basically it's illegal trust into which you put your
- 00:13
home I eat your residents a k a The are
- 00:17
there in the Cooper thing for all kinds of beneficial
Full Transcript
- 00:19
tax reasons Well people create Q parts so that they
- 00:22
can transfer their homes and usually in a tax advantaged
- 00:25
or low taxi kind of way to their kids Loved
- 00:28
ones Or you know members of the Justice League Well
- 00:31
the Golden Ticket in Q Bert is the notion of
- 00:33
discounted cash flow Are discounting future value to be a
- 00:37
lower number in its present value that is the value
- 00:40
of the home is determined by an SS or usually
- 00:43
not Zillow yet and note that the government has a
- 00:46
cap or a maximum dollar value that can be transferred
- 00:50
from one generation to the next without suffering Severe taxes
- 00:54
like that's around 12,000,000 bucks these days So it's in
- 00:56
the interest of those with assets to transfer to make
- 00:58
that value appear to be as low as possible It
- 01:01
should be conceivable that if the home is to be
- 01:03
transferred not today but in a decade or even to
- 01:06
well then that future value of that home could be
- 01:09
re construed as being worth a lot less than it's
- 01:11
worth today and the official legal transfer happens in a
- 01:15
decade or two So it's going to transfer using up
- 01:17
a lot less of that 12 ish $1,000,000 estate tax
- 01:21
minimum ceiling there before you really get taxed And this
- 01:24
all makes sense If you think about real estate in
- 01:26
the context of well normal commercial real estate like apartment
- 01:29
buildings in office buildings that is If someone gave you
- 01:32
an apartment building but told you that you couldn't collect
- 01:34
any rent from it for 18 years than that building
- 01:38
would carry a significant value Discount today compared to what
- 01:42
it would carry were given to the beneficiary this week
- 01:45
because you collect 18 years worth a rent before the
- 01:48
other guys begin collecting So going to Cooper the home
- 01:50
is that essentially given in parts Teo say the beloved
- 01:53
children of the owners and the value of the asset
- 01:56
being transferred gets the benefit of what is essentially present
- 01:59
value or discounted cash flow evaluations such that the government
- 02:03
allows for the home to retain a flat steady UN
- 02:06
inflated valuation while for tax purposes well the value of
- 02:09
the home is discounted Meaningful e In the future for
- 02:12
example the owners of the home might have a nice
- 02:14
little pad with a market value today of well $5,000,000
- 02:17
they're legally allowed to transfer up to 12,000,000 bucks to
- 02:20
their kids with no estate tax If they just transferred
- 02:23
the home today well they'd use up well 5/12 of
- 02:26
their total tax free estate transfer option But the parents
- 02:29
have other assets beyond the house They'd also like to
- 02:32
transfer with no estate tax write like stocks and bonds
- 02:35
and maybe some other real estate Well this is where
- 02:37
the Q part comes in Trying to mitigate much of
- 02:39
the $5,000,000 in assess value of the home by discounting
- 02:43
its transfer value a decade and change into the future
- 02:47
So let's say the transfer value was pegged at 15
- 02:49
years from now The discount rate of 5% per year
- 02:51
Compound ID Will the duration and years in the discount
- 02:54
rate er set by a government formula based largely on
- 02:57
what government bond paper is trading at in a given
- 03:00
time period and the age of the parents and other
- 03:02
expected structural life issues and life expectancy and a whole
- 03:06
bunch of other elements get a bald in that mush
- 03:08
pot of regulatory compiling So the government comes up with
- 03:11
a discount rate or a number so that $5,000,000 house
- 03:15
living inside of a queue pert with children still in
- 03:17
grammar school doesn't need to be traded To them is
- 03:20
an asset for say 15 2030 years Something like that
- 03:23
Big note You must be alive for the entire vesting
- 03:27
period of your Q Bert If you die well basically
- 03:30
then everything reverts back to a fully taxed state and
- 03:33
in some states hi California that fully tax status can
- 03:37
be painful right You don't get the estate waiver discount
- 03:39
minimum there So that home then well we're guessing here
- 03:42
is discounted at a rate of $5,000,000 divided by one
- 03:45
plus point No Five to the 15th Power right 15
- 03:48
years compounded If you do the math there that's roughly
- 03:50
two and change to 20.1 something like that meaning that
- 03:53
the transfer price of that $5,000,000 home to the children
- 03:57
then takes up well instead of 5/12 of the tax
- 04:00
free transfer It takes up something closer to 2/12 of
- 04:04
the tax free estate transfer rights only using up two
- 04:06
of the 12,000,000 Because the discounted or present value of
- 04:10
the home inside of Cuba it has gone from being
- 04:12
worth $5,000,000 current market value to being $5,000,000 divided by
- 04:16
roughly two and change or about two point 4,000,000 in
- 04:19
future assessed estate transfer value Yes that's the fancy phrasing
- 04:24
So yes there are costs in setting up a Q
- 04:26
Bert But usually the benefits of the kid's vastly outweigh
- 04:28
the 10 or 20 grand and change and setting one
- 04:30
of these puppies up especially if the dough is on
- 04:33
one of this kind of big multi $1,000,000 scale and
- 04:36
the ever big benefit Well you can actually live in
- 04:38
the home while you have in theory given it away
- 04:41
assuming you can you know still do stairs Anyway when
- 04:44
you are dealing with a homeowner who has that kind
- 04:46
of cash well there's always a chance he might be 00:04:48.862 --> [endTime] this guy Yeah oh
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