The concept of the Life Estate
is relatively simple. A donor may choose to donate a
personal residence to Radio Kansas. However, the donor
is able to continue living in the home or even renting
it out for the remainder of their life. The donation
results in an immediate tax deduction for the donor,
which is what makes this method of donation so attractive.
The deduction is based on the "remainder interest" of
the property. That is the value of the property, less
the value of the donor using it for the remainder of
his life. In the end, Radio Kansas receives title to
the home and can sell it.
||Will Jefferson has resided in his modest
home on a four acre lot for many years. He now is age
80 and his IRA distributions continue to increase. In
order to create a charitable deduction to offset his
increased taxable income, Mr. Jefferson is contemplating
transferring the remainder in his home to Radio Kansas.
With his IRA and other assets, he has substantial liquidity
and will not need the value of the home for living expenses.
He decides to deed the remainder interest in the home
to Radio Kansas. Based upon his age, he receives a charitable
deduction of $201,930. This deduction is an appreciated-type
deduction usable to 30% of adjusted gross income. Over
a period of four or five years, this charitable deduction
will save $70,676 in income taxes. The deduction is
based on assumed values for the residence of $50,000
and for the land of $250,000. While it is unusual for
such a modest residence to be on expensive land, Will
has lived on that property for many years and the adjoining
city has now developed all around his property, thus
increasing substantially the value of the land.
|| To qualify for a Life
Estate, any property used by the donor as a personal residence
is acceptable. Vacation residences also qualify. The term
"personal residence" also includes stock owned by a taxpayer
in a cooperative housing corporation. A farm also qualifies
for a Life Estate donation. The term "farm" is defined as
property used for production of crops or grazing land for
cattle. The farm also includes fixtures, such as buildings,
grain bins and other permanent improvements. Normally, the
transfer of a residence may include reasonable surrounding
grounds. Nearly any property used as a residence or for agricultural
purposes will qualify for a life estate gift.
For more information, contact Andrea Springer at 1-800-723-4657