A QRPT is a type of "grantor retained income trust" or a "GRIT" which work to save estate taxes. Our tax system imposes a one-way transfer on transferring wealth from one person to another; a QRPT can work to save on the transfer tax.
One of the kinks of using a QRPT has to do with the generation-skipping transfer (GST) laws. In short, there is a strong incentive to have the trust property pass only to your living children, sounds obvious, but stay with me. If, heaven forbid, your child dies during the QRPT term, your grandchildren of that child cannot benefit from the trust property. The benefits skip a generation.
If this is a concern, then the QRPT could hold a term insurance policy on your life, you being the donor of the QRPT. The term of the policy should match the term of the QPRT and its face amount could equal the estimated estate tax savings it is hoped the OPRT would produce. A good tactic resulting in either a tax savings from the QPRT, or if the family loses that because you pass before the term of the QPRT expires, your family will still gain the life insurance proceeds.
