The IRS recently ruled that two identical trusts created by a husband and wife to hold their respective one-half interests in a personal residence will be qualified personal residence trusts (QPRTs).

The property in question consists of a number of acres with a house, a shed, and a small caretaker's facility. The residence is similar in size to nearby properties used for residential purposes. The couple that owns the residence wants to create two trusts. Trust A will hold the husband's one-half interest, while Trust B holds the wife's one-half interest.

Both trusts provide that during their terms they must pay all income to their respective settlor, who will be entitled to the exclusive use, possession, and enjoyment of the interest in trust property. The trusts can hold no property other than the residence, except amounts permitted under §25.2702-5(c)(5) of the Gift Tax Regulations. The settlors' interests may not be commuted, and the trusts will terminate in 20 years or upon the date of the respective settlor's death. Upon the termination of both trusts, the couple's children will receive the trust assets.

The IRS ruled that the property transferred to the trust is a qualifying personal residence under §25.2702-5 and that both trusts will be QPRTs.