Real Estate—Retained Life Estate
You may give the property to the Met while retaining the right to occupy the residence or operate the farm. 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 your lifestyle. In addition, this plan permits you to escape any potential capital-gain tax on the built-in appreciation.
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 the Met 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 $179,000 (the value of the charity's remainder interest). Since Amy's tax bracket is 24%, her total tax savings will be almost $43,000 (24% of $179,000). 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 the Met in exchange for a stream of payments for life, or simply give her life interest outright and receive another deduction.
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This publication was prepared by Pentera Inc., an Indiana business corporation, which is independent of the Met. Pentera is solely responsible for its content, and the Met disclaims all liability. The information is intended to introduce certain concepts, and we caution you not to rely on it for any legal, tax, or other purpose. You should obtain the advice of your own legal and tax advisors before making any gift.
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