Retained Life Estate
- The Community Foundation may accept a gift of personal residence, vacation home, or farm in which your client retains the right to occupy the property for a set number of years or until her death.
- This type of gift allows your client to make a significant donation using a valuable asset without impacting their living arrangements or cash flow. It also removes an asset from their estate, potentially reducing the total amount of tax owed on the estate after their death.
Retained life estate example:
- Client profile:
- Julia and Ed ages 78 and 77, still live in the house in which they raised their three children. Julia and Ed are in good health and have no plans to move. Their house has appreciated greatly over the years and is now worth about $700,000. Their children are grown with homes of their own and have no interest in keeping the house in the family.
- Julia and Ed would like to make a large gift to the local museum, but they don’t feel comfortable giving a significant portion of their investment assets away.
- Client opportunity:
- Julia and Ed use their house to make a retained life estate gift to the Community Foundation, while maintaining the right to live in it for the rest of their lives.
- They may deduct up to 30% of their adjusted gross income in the year of the gift. If they cannot use their entire deduction in the year of their gift, they may carry forward the balance for up to five additional years.
- Once Julia and Ed pass away, the Community Foundation will sell the property and use the proceeds to create an endowed fund. This fund will provide yearly grants to Julia and Ed’s designated nonprofit beneficiary, the local museum.
- Julia and Ed’s home is no longer considered part of their estate. As a result, their heirs will potentially save on estate taxes.
Please contact Elena for further details about this type of gift.
Gifts of real estate received by the Community Foundation are subject to the approval of the Community Foundation’s Board.