May I Give You My Home?
Retained Life Estate
May Be Attractive Gift Option

By Judy Keller
Senior Vice President
Midwest Region

We have recently been asked by donors to two different clients whether it is possible to donate their home and receive a tax advantage right away. Given today’s economy, many donors who still want to give are working more creatively to make their gifts possible. If your organization has a friend or donor who wants to make a gift, yet preserve cash, this may be a gift option that makes sense for you both. Here is a brief summary of this gift option.

RETAINED LIFE ESTATES

A retained life estate agreement is an opportunity to continue living in or using your home, vacation home or farm while establishing a gift now and enjoying its benefits—including current tax savings—that usually characterize only lifetime charitable gifts.

How does it Work?

While nothing changes in your current lifestyle or use of the property, the retained life estate arrangement generates a sizable income tax deduction for you in the year you establish the gift. At the end of the retained life estate term (usually your life or joint lifetimes), the property goes to the designated nonprofit organization as the charitable recipient.

Why Fund a Charitable Gift with Real Estate?

Unless you sell the property, your options for receiving current financial benefits from the real estate are usually limited to increasing your debt or renting the property to someone else.

Real property can also present difficulties for estate planning, since it is rarely practical to transfer a single property to more than one heir. The result is a choice between leaving inequitable benefits for heirs, or placing the burden—and costs—of selling the property onto your executor and estate. Property located in different states may be subject to additional probate and transfer costs.

Why Should I Establish a Retained Life Estate?

If you’re experiencing high income tax liability, or just a desire for additional cash to spend, the retained life estate arrangement is a painless way to derive cash from liquid property and contribute to an organization’s mission. You will also be removing a tax liability and potential headache, expensive probate item and taxable asset from your estate.

How do I find out more?

Jeffrey Byrne & Associates is pleased to visit with you about this and other real estate gift options on behalf of our clients. We encourage you to seek counsel from your own financial and legal advisors and be aware that laws vary from state to state.