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Depressed real estate values and changes in tax rules make this a good time for older homeowners to transfer property to their children using a specialized trust designed to save on gift and estate taxes.

Known as "qualified personal residence trusts," or QPRTs, these vehicles allow a homeowner to continue to live in a house for years before transferring ownership to heirs at a discount to the current market value.

Wealth advisers say QPRTs are getting more popular as clients seek to take advantage of beaten-down property values and a temporary increase in the gift tax exemption to $5 million from $1 million for individuals and to $10 million from $2 million for couples.

"When the gift tax exemption was only $1 million, it was more difficult for clients to pass along their homes without gift tax consequences," says Mike Foltz, a principal at Balasa Dinverno Foltz LLC, an Itasca, Ill., estate planning firm. Foltz says five of his clients currently are evaluating QPRTs, up from two at this time last year.

"They can move a big asset out of their estates at a fraction of the future value," he says.

To maximize the savings -- and minimize the conflict -- families that use these trusts need to plan carefully. Advisers say the strategy makes the most sense for someone with a net worth above the current estate tax exemption, which also is $5 million per person.

Below that level, transferring a residence through a QPRT still could be a smart tax move for those who might get caught if their assets appreciate or the individual estate tax exemption drops back to $3.5 million (as the Obama administration's 2012 budget proposes) or even to $1 million (as the current law mandates for 2013).

But there are risks. Most use QPRTs for homes they expect to remain in the family after they are gone. In part, that is because when a homeowner gives away a residence in a QPRT, his or her adjusted tax basis -- the original purchase price plus improvements -- carries over to the heirs. As a result, if the children were to turn around and sell the home, they could owe a substantial capital gains tax. (Still, at 15%, the capital gains tax rate is far below the 35% estate tax rate.)

What's more, selling a home held in a QPRT "can get messy," says Blanche Lark Christerson, a managing director at Deutsche Bank Private Wealth Management in New York. Because of restrictions on the amount of cash that QPRTs can hold, a homeowner must reinvest the proceeds of a sale in another property or take back the cash directly or in a series of payments. Since withdrawing cash from a QPRT reduces the amount that will go to heirs, it defeats the purpose of the deal, Christerson says.

Another risk: You have to give up the home when the trust ends, even if you are still alive. To prepare for that day, many homeowners craft upfront agreements that give them the right to rent the property for the rest of their lives. Rental payments are an effective way to transfer more to heirs. But to pass muster with the Internal Revenue Service, you must pay a fair-market amount -- and your children will owe tax on the income.

Still, the QPRT can be a powerful estate planning tool. William Mielke, 63, and his wife, Barbara, 62, are considering putting their Marco Island, Fla., oceanfront vacation condominium into a QPRT for the benefit of their 30-year-old daughter. With a QPRT, Mielke, the president and chief executive of an engineering firm in Waukesha, Wis., can transfer a valuable asset without giving up his access to the home or reducing the liquid investments he may need in retirement, says his adviser, Mark Ziety at Shakespeare Wealth Management, in Pewaukee, Wis.

What's more, if the market for Florida real estate rebounds (and the Mielkes outlive their trust), any appreciation the property earns will pass to the daughter free of gift taxes or estate taxes.

When you set up a QPRT, you remain the home's owner for as long as the trust is in effect -- often 10 to 20 years. During that period, you continue to live in the house and pay all the expenses, including the property taxes and insurance. When the trust expires, the home passes to your children, free of a gift tax. Typically, the necessary appraisals and legal documents run $5,000 to $10,000.

Here's how it works: Suppose you set up a QPRT at age 60 when your property is worth $2.5 million. Since the home won't actually pass to your children until the trust expires, the law allows you to discount the $2.5 million you are transferring by an interest rate the Internal Revenue Service sets monthly. This tells you the current value of the gift you will be making in the future.

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At today's 3% rate, the current value of a $2.5 million gift to be made in 10 years is $1.59 million, Deutsche's Christerson says.

If you don't outlive the trust, the market value of your home will be included in your estate. (While your demise would cause your heirs to miss out on any estate tax savings, it also would nullify the upfront gift tax consequences of the deal.)

To prevent conflict, some families hash out written plans for dividing the finances and chores. For Mielke, this is easy: "She's our only daughter, so we won't have to worry about family arguments over who wants to use the house and whether to sell."

This article was reported by Anne Tergesen for The Wall Street Journal.