Who pays expenses of maintenance, insurance, and real estate taxes in a QPRT?


During the cupert term, the retained term, the exclusive right to live term in the cupert, the donor pays all the expenses associated with the maintenance, the utilities, the taxes, and so on. Hopefully, the cupert was funded with unencumbered real estate, meaning there’s no mortgage on the real estate. If there was a mortgage, it’s a more complicated transaction and, of course, the donor is going to have to make those mortgage payments. I won’t allow a client to use encumbered or mortgaged property for a cupert because we have ongoing gift tax calculation problems.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.