Real Estate—Retained Life Estate

Donor may give the property to UJA-Federation while retaining the right to occupy the residence. Such a gift of a remainder interest provides a charitable income-tax deduction for the present value of the remainder interest that frees up tax dollars into spendable income—without causing any disruption in lifestyle. In addition, this plan permits the donor to escape any potential capital-gain tax on the built-in appreciation.

Any gift of this type needs to be reviewed by UJA-Federation's gift acceptance committee.

Example: Amy, 75 and recently widowed, has lived in her home for 25 years and has no plans to move. To obtain present tax relief without altering her lifestyle, she gives her home to UJA-Federation while retaining the right to live in the home for life.

At the time of the gift, the residence is appraised at $250,000. This gift arrangement will provide a charitable income-tax deduction of more than $123,214 (the value of the charity's remainder interest). Since Amy's tax bracket is 24%, her total tax savings will be about $29,571 (24% of $123,214). This is the amount by which her income tax will be reduced over the period she reports the deduction.

In the event she decides to move, she will have several options: rent the property, give her life interest in the home to UJA-Federation in exchange for a stream of payments for life, or simply give her life interest outright and receive another deduction.

Want to see a diagram about how a gifts of real estate work? View the diagram of this gift

More Information