Life Estate

Gift of a Remainder Interest in Residence with Life Estate Retained

"Home is where the heart is."

Home. The place where we grew up-the first house we purchased for ourselves or with our spouse-the place we raised children-the place where family gathers for Thanksgiving-our retreat from the world.

Our homes are so many things to us. Because they are special, we should give consideration to what will happen to them when we enter into our final home with God.

Many individuals live in homes that will be sold at their deaths. The home is usually sold because no one in the family chooses to live there. If you are interested in making a substantial gift to a charitable organization that is dear to you, such as WMU, a gift involving your home may be of interest.

Do you know there is a way you may receive all the benefits of making a gift of your home to WMU today while still continuing to have the benefits of home ownership during your lifetime?

Give your home to WMU and continue to live there. You can make a gift of your primary residence, vacation/second home, or farm to WMU or another charity of your choice today and yet continue to live in the property until your death. This gift alternative applies to single individuals, married couples for their joint lives, or a homeowner and one other person (i.e., a sibling). This is known as transferring a remainder interest in a residence, while retaining a life estate for the person or persons who will continue to live in the home.

This gift alternative is specifically referenced in the Internal Revenue Code. According to the laws that allow such a gift, a donor executes a deed that gives her residence to charity. At the end of the deed, the donor reserves to herself and/or for another person a life estate in the property. By retaining a life estate, the donor continues to have all the benefits and responsibilities of home ownership during her lifetime. This includes paying the taxes and insurance, handling the maintenance, making improvements, if desired, and even receiving any income which the property generates. As long as the donor(s) are living, the house belongs to them.

At the death of the donor, the property does not pass through her probated estate and is not subject to estate taxes. Because she made an earlier gift by deed of the remainder interest in her residence, the property passes directly to the charity at her death.

Receive a current income tax deduction. Even though the donor continues to live in her home during her lifetime, she is entitled to an income tax charitable deduction when she transfers the remainder interest to charity by deed. The value of her deduction is based on her age, the age of any other person who will live in the home, and the fair market value of the property on the date of the gift.

Continue to have flexibility. What if the donor decides to move to another home or a retirement facility after she has made this gift? There is no problem. WMU would simply join with her in the sale of her home. The proceeds from the sale could then be invested in a new home in which the donor would own a life estate and WMU would own the remainder interest. If she decided not to buy a new home but to rent, the sales proceeds would be invested and she would use the income produced by those assets to pay her rental obligations during her lifetime.

EXAMPLE:
Jane Adams is a 75-year-old widow and has one married daughter. Jane's husband was a pastor and both were actively involved in WMU during their adult lives. Jane inherited a small farm from her parents years ago, and it was sold to provide an income stream for the Adams' retirement. Jane has talked with her daughter about making a substantial gift to WMU as a legacy in memory of her parents and her husband

Jane could use some income tax deductions, but she is concerned about giving away too much income. Then she read about a gift vehicle that would allow her to make a significant charitable gift to WMU without having to give up any income.

Jane talked with a member of the WMU Foundation staff about making a gift of the remainder interest in her residence to WMU and retaining a life estate for herself. She liked the idea that she could make a substantial gift to WMU without having to reduce her income stream or leave her home. She would simply execute a warranty deed gifting her home to WMU and retaining a life estate.

Jane's home was appraised at $140,000, and she learned she would receive a charitable income tax deduction of approximately $66,440. This income tax deduction could be used to offset up to 30% of Jane's adjusted gross income this year. Any unused part of the deduction may be carried forward up to five additional tax years, if needed. Additionally, Jane has removed the value of her home from her estate for federal estate tax purposes.

Jane completed the gift, and both she and her daughter are pleased that their family's love for missions will live on through this legacy.

Making Your Goals Become Realities
As you can see, a gift of the remainder interest in a residence provides a way for you to accomplish your goals and substantially benefit WMU and missions. If you would like more information about gift opportunities or would like to visit with a member of the WMU Foundation staff, please call or write:

There is no obligation, of course, and all inquiries are kept strictly confidential.

This information is not intended as specific legal advice. Consult your attorney when considering any legal matter.

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