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FOUNDATION NEWS Caring for the Ministry of Grace: "Ecclesia Perpetua" August 2004 | ||||
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(Life Estate Reserved Agreement) | ||||
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Don and Della are retired and have wanted to do something significant for ministry in Oregon. They have considered making a current gift of their residence, but really don't want to move into a retirement facility. They like their home and intend to stay there until death. The logical solution seems to be a bequest. Consequently, they decide to revise their wills and transfer their house to their congregation after the death of the second spouse. Then Don and Della hear about a special provision in the tax code allowing them to give their home to the church now, without having to move out. And, by doing it now, they can get a sizable income tax deduction -- something they would not receive with a bequest gift. It is, for them, an excellent solution. Here's how it works: A personal residence or farm is deeded to the ELCA through a life estate reserved agreement. The deed indicates that the owners (husband and wife) reserve the right to use the property for the rest of their lives. At the death of the second spouse, the property is available to their congregation to sell or to use some other way. When the deed is conveyed to the ELCA, the property is appraised to determine the fair market value. Then the life expectancy of the owners (donors) is considered along with other factors and the present value of the remainder interest is determined. This amount represents the |
charitable gift value of the arrangement and is available now to use as a charitable income tax deduction. It is precisely this income tax deduction feature that makes the life estate reserved agreement so attractive. If the property were transferred through the will at death, there would be no income tax deduction. However, making the transfer during life (while retaining the right to use the property) creates the deduction. Also, removing the property from one's estate now means the possible reduction of estate taxes and probate costs later. After the agreement is signed, the tenants would be expected to maintain insurance, pay property taxes, care for typical maintenance and repair items related to the property, and permit the charity to assist as appropriate. This all may sound a little confusing, but it really is quite easy to accomplish. The Oregon Synod Director of Planned Giving, Patricia Larsen, is just the one to explain it in simple terms and to give you a personalized illustration of what something like this might mean for you. If you would like further information about this kind of planned gift or other giving possibilities, call Patricia Larsen at (503) 244-4102. At the very least, you will become better informed about the options you have for accomplishing your lifetime giving goals. | ||||
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