Riverside Healthcare - Planned Living Newsletter
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Gift Your Real Estate While Still Living in it

Pamela Davidson

Many charitably-minded older individuals can enjoy significant benefits from a retained life estate gift of certain real estate to a favored charity made later in life. This technique is basically a transfer by deed of a personal residence, vacation home, or farm (the only types of real estate allowed for this technique) to a charity with the donor retaining on the face of that recorded deed the right to live there for the rest of his or her lifetime. That life estate can also include another person of the same generation like a spouse, partner or sibling. The donor continues to reside in and maintain the property, pay its real estate taxes, and pay its insurance, so life does not change.

The greatest advantage of this gift option is the satisfaction of making the gift during life, when it can be acknowledged and completed to the donor’s satisfaction. Another huge advantage is the income tax deduction a donor receives for the charitable remainder value, which is the actuarial value of the remainder after the life tenancies. Since most individuals have nontaxable estates, a gift of the same real estate to charity in a will or trust means a wasted, unused deduction, while a retained life estate means being able to use a valuable income tax deduction during life. Another significant advantage is leaving a life estate to a loved one of the same generation, knowing that he or she has a place to live for his or her lifetime, while also simplifying an estate. The charity also benefits, because it has immediate possession of the gifted real estate after the tenancies end, meaning it can use or list the property for sale much more quickly.

The donor can move from this deeded real estate later in life if need be, and then could gift his or her remaining life estate to the charity. Alternatively, the donor could share a small piece of any sale proceeds with the charity. In either scenario, the donor may then receive an additional small actuarial income tax deduction. This is why only older individuals, perhaps age 70 and older, should consider this attractive gift choice. They also and should always first consult the charity, since real estate is involved, and real estate gifts can present other issues.