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socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 38135
Experience:  Retired (mostly)
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What are the implications of of having placed a mortgage on

Customer Question

What are the implications of of having placed a mortgage on the QPRT property after creation of the QPRT, contrary to regulations? Is the QPRT disqualified and what are the implications of that?
Submitted: 4 years ago.
Category: Tax
Expert:  socrateaser replied 4 years ago.
Unless the trust follows the IRS requirements, the life tenant )grantor) will have failed to transfer the property to the trust for tax purposes, and the property will remain in the grantor's gross estate for estate tax purposes.

The trust may be perfectly valid for the purpose of transferring property to the trustee for the beneficiary's/ies' use and benefit. But, for estate tax purposes the property remains in the grantor's gross estate.

At this time, because the estate tax exemption is $5,000,000, the error you describe is, for most people, irrelevant. But, if Congress does nothing then on Jan 1, 2013, the exemption returns to $1,000,000, and that could create a difficult estate tax situation for many decedent estates, who have substantial assets.

Hope this helps.

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Customer: replied 4 years ago.
I just learned that I was not supposed to pledge our QPRT home as security for a mortgage. Since it was done years ago, what are the implications? Is the QPRT still valid? If it is not, what can v be cone about it? Detail Required: HIGH; Urgency: HIGH
Expert:  socrateaser replied 4 years ago.
This is now an incredibly complicated issue. Questions for you:

1. How is the property currently titled (who does the deed name as grantee?
2. How is the mortgage currently titled (who does the mortgage name as grantor)?
3. What did you do with the proceeds of the mortgage loan?

Thanks in advance.

NOTICE: My goal here is to entertain while educating the public about the law. Your positive feedback to the website is appreciated. If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!

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