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A retain life estate is a gift plan defined by federal tax law,
that allows you to donate your home or farm to charity,
while retain the right to use it for the rest of your life.
As the creator of a retained life estate,
you irrevocably deed to charity your home or
farm but retain the right to use it for the rest of your life,
a term of years,
or a combination of the two.
You may also use a vacation home to create this kind of gift.
While you retain the right to use your property,
you continue to be responsible for all routine expenses,
maintenance fees, insurance, property taxes, repairs etc.
If you later decide to vacate your property,
you may rent all or part of the property to someone else,
or sell the property in cooperation with a charity.
When your retain life estate ends,
the charity can then use your property or the proceeds from the sale of your property,
for the purposes you designated.
The benefits of a retain life estate include.
Number one, you will qualify for a federal income tax deduction.
Note that the deductions for a gift of
long-term appreciated property will be
limited to 30 percent of your adjusted gross income.
Gifts of cash, short-term appreciated property, ordinary income property,
and non-appreciated property, will be
limited to 50 percent of your adjusted gross income.
If necessary, you may take unused deductions of either kind over
the next five years subject to the same 30 or 50 percent limitation.
Number two. You will retain the right to use your home or farm for the rest of your life.
A term of years,
or a combination of the two.
Number three.
Your estate may enjoy reduced property costs and estate taxes.
And number four, you will provide generous support to the charity.
You will find a sample template for a retain life estate in your resources.
The main purpose of the grim is the detail responsibilities to the donor,
while they continue to live in the property.
The donor irrevocably deeds the property to the charity,
but must maintain it as if they owned it.
This is counter-intuitive for most people,
because when you no longer own your home,
you typically don't continue to live there and maintain it.
This is why the agreement is so important.
It helps both the donor and the charity understand who is responsible for certain things.
As you'll see in the template,
the donor's are responsible for the following;
Make necessary repairs and maintain the property,
pay property taxes, insure the property,
make mortgage payments if there is a loan,
allow the charity access to the property,
and consult with the charity before making major changes or improvements.
You will encounter retain life estate agreement when you're
working with a donor who is considering entering into this kind of agreement.
There are several reasons a donor would be interested in this plan giving option.
They may be looking for an income tax deduction,
and this makes sense for them.
It may be that they're looking to simplify
their state and their biggest asset is their home.
If they have already planned for the charity to get their estate eventually,
they may want to take advantage of the benefits of gifting it during their lifetime.
Because they have a retain life estate,
they could continue to live in the house for as long as they want.
Here is how it might sound if I were describing or
recommending retain life estate to a donor.
Thank you for your interest in including XYZ Charity in your estate plans.
We are grateful that you value our mission enough to make us a part of your legacy.
Let me review the retain life estate agreement with you.
This agreement details the rights and responsibilities
of both XYZ Charity and you as the donor.
The retain life estate is an irrevocable arrangement so
I recommend that you review this agreement with your professional advisor.
As we've discussed, although your gifting your home to us,
you still are responsible for it as if you still owned it.
Let me highlight some of your responsibilities.
You will continue to make necessary repairs and
maintain the home and the property, pay property taxes,
insure the property, make any mortgage payments if there is a loan,
allow us to access the property,
and consult with us before making any major changes or improvements.
Upon the satisfaction of the retain life obligation,
residual will be used as you stated in Schedule B.
Once you're satisfied with the details of the agreement,
then you'll need to deed the property to us and sign the agreement.
Thank you again for your generosity and support.
I look forward to working with you to finalize your retain life estate.
I will check back with you in a couple weeks if I haven't heard from you.
It was a pleasure meeting with you. See you soon.
That concludes our look at the four most
common planned giving agreements and templates for each one.
Please be sure to access the samples of each in your resources.
Let's refresh your memory before we move on.
These include, sample bequests language,
a charitable gift annuity contract,
a charitable remainder trust agreement,
and a retain life estate agreement.
Let's recap what we've covered.
After this lesson, you should now be able to
recall the four most common planned giving agreements.
Explain each of these planned giving agreements in general terms,
describe the template for each,
compare and contrast these four plan giving agreements.
In our next lesson,
we will explore and evaluate planned giving software programs.
Brian CaseyAssistant Vice Chancellor for Planned Giving
