The residence owners retain the right to live in the residence for a term of years. At the end of the term, their children own the property.
Gift tax is calculated and based on the fair market value on the date of transfer.
With a QPRT, senior family members are making a current gift of a future interest. This results in a discounted transfer tax value. The actual transfer tax valuation depends on the term of the QPRT trust and the published IRS interest rate in effect on the date of transfer. In addition, all future appreciation of the residence escapes further transfer tax consequences. Should the transferor die during the term of the QPRT trust, the residence is included in his or her taxable estate.