By: Laurie Valentine
Joe and Linda decided they wanted to do something significant for their church and they hoped they could use their house to accomplish their giving objectives. They considered making a current gift of their house, but decided against that because they hope to live in it for many more years.
The logical solution seemed to be to add a gift of the house to their church in their wills to take effect after both of them are deceased.
Then Joe and Linda heard about a way to make a gift to their church now, get a sizable current income tax deduction and still be able to live in their home for the rest of their lives. This solution—a retained life estate gift—-sounded like the right plan for them.
To make a retained life estate gift homeowners deed their personal residence or farm to a charity through an irrevocable retained life estate agreement. The deed includes a provision reserving to the owners the right to use the property for the rest of their lives. At the death of the last life tenant, the charity becomes the full outright owner of the property.
The value of a retained life estate gift for income tax deduction purposes is the current market value of Joe and Linda’s house reduced by the value of their lifetime right to use the house.
Joe and Linda, as the life tenants, will be expected to maintain property insurance, pay the property taxes and pay for typical maintenance and repair items.
Laurie Valentine is COO and Trust Counsel for the Kentucky Baptist Foundation, PO Box 436389, Louisville, KY 40253; (502) 489-3533 or 1-866-489-3533 (Toll-free, Kentucky Only); KYBaptistFoundation.org
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.