Our organization accepts a gift of property — either a personal residence or farm — and you retain the right to use the property for your lifetime. A retained life interest, or retained life estate as it is commonly called, allows a donor to claim a charitable deduction at present for the gift of the remainder value of real property donated to charity. Transferring a personal residence, second home, or farm qualifies for a retained life estate. Giving real estate during one’s lifetime may simplify the estate settlement process so that executors are relieved of costs, expenses, and possible delays in the sale and transfer of real estate upon the donor’s death. The donor may also reduce estate taxes by removing the property from the taxable estate.
You execute a deed transferring a house or farm to us. In the deed, you retain a “life estate” that grants you the right to use the home for life. At the time of the gift, you and our organization enter into a Maintenance, Insurance, and Taxes (MIT) agreement.
Duration
The Reserved Life Estate typically lasts for the life of the donor.
Deed Restrictions
The deed of the remainder interest to our organization must not be restricted.
Mortgage
You can make a remainder interest gift even though there is a mortgage on your property.
MIT Agreement
Rights and responsibilities between the donor and the charity must be documented in a life estate agreement. The donor must maintain the property, pay property taxes, insure the property against loss and liability, repair the property if damaged, and avoid placing liens or encumbrances on the property without the charity’s permission. In retaining rights, the donor also can lease out the property for a source of income or sell the remainder of the life interest to the charity for a lump sum.
Tax Deduction
The charitable income tax deduction for a retained life estate equals the net present value of the remainder interest contributed to charity. The computation is performed under guidelines in Internal Revenue Service regulations based upon, among other things, the fair market value of the property on the date of transfer, its estimated useful life and salvage value, the term of the agreement, and a defined federal rate.
Preserves Lifetime Use
You can use and control the home or farm for the rest of your life.
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