| Make a Gift
of Real Estate and Retain Use of The Property  Mary
Thomas, 78, owns a vacation home that is debt-free and carries a market value of $100,000.
Her children live in other parts of the country and are doing well financially. They have told Mary that they are not interested in
assuming responsibility for the vacation home now or in the future.
Mary is trying to simplify her estate and would like to arrange for the eventual
disposition of the property.
However, she wishes to use it for a few more years.
Mary can benefit from a gift plan known as a retained life estate.
Under this plan, she can irrevocably deed a home, vacation home, or farm to Mines while
retaining the right to use it for life. In
return for entering into this arrangement, she will receive a substantial charitable
deduction for part of her property’s value. When
Mary passes away, the vacation home immediately becomes the sole property of Mines.
Based on her age, the home’s value, and other
factors, Mary will realize the following benefits from a retained life estate agreement:
·
a charitable deduction of more than
$53,000—which may result in income tax savings of more than $20,000 for a taxpayer in
the 40% bracket
·
continued use of the property for as long as
she wishes
·
reduced probate expenses and possibly
reduced estate taxes
·
the enjoyment of making a major gift to
Mines
While Mary retains the right to use the property, she will continue to be responsible for
all routine expenses—insurance, property taxes, repairs, etc.
If she later decides to relinquish her right to use it, she may sell the property in
cooperation with the charity, with the proceeds being divided between the two parties. Or she may donate the rest of her interest to
Mines and receive additional income tax benefits.
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