Life Estate Agreement
A gift of property, such as personal residence or farm. The donor retains full use and right to such properties during the donor's lifetime.
What are some benefits of a life estate agreement?
Donors can receive a sizable charitable income tax deduction by making a gift of the remainder interest in their property to Oxfam America.
Donors are not required to transfer the entire acreage of the personal residence or farm, but may keep or sell a portion of the property and still receive the special tax benefits for a remainder interest gift to charity. A vacation home, condo, co-op, or yacht may qualify as a "personal residence" if it is used for residential purposes by the donor at least some of the time.
After making a gift of a remainder interest to Oxfam America, the donor may continue to occupy the property or:
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Move and leave the property unoccupied;
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Lease or rent the property to third parties;
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Give/sell the life estate to Oxfam America;
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Join with Oxfam America to sell the life estate and remainder interest together;
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Sell the life estate to a third party (but this may be difficult since the buyer's interest typically terminates at the donor's death).
What are some details and tax issues regarding life estate agreements?
To receive the tax benefits, the deed cannot be placed "in trust," nor can the donor require the charity to sell the property.
The donor's age is taken into consideration when allocating the value of the farm or residence between the donor's "life estate" and the tax deductible "remainder interest" passing to charity. Older donors qualify for larger charitable income tax deductions.
An appraiser should be used to allocate the value between land and depreciable improvements for purposes of computing the income tax charitable deduction.
Improvements made to the property by the donor after the gift is made may qualify for additional income tax charitable deductions.
Contact our gift planning specialist for more information.