Ways to Plan a Gift - Retained
Life Estates
Definition
A retained life estate contract enables a donor
to gift a personal residence to St. Lawrence and preserve
the right to remain in the property for life.
Further Information
A gift of the remainder interest in a residence
requires a contract, a Life Estate Agreement, between
the donor(s) and St. Lawrence. This agreement outlines
the rights and responsibilities of each party for such
things as insurance, taxes, maintenance and major repairs.
Generally, in addition to the right to remain in the
property, the donor also preserves the responsibility
to maintain and protect the property. The right to ultimately
sell (or use) the property, the “remainder interest,” passes
to St. Lawrence.
A donor may create a retained life estate
with a personal residence, vacation home, farm or possibly
shares in a cooperative housing development. A Retained
Life Estate Agreement is an irrevocable gift.
Before creating a life estate agreement,
a donor should consider several questions:
-
Can St. Lawrence use or easily sell
the property?
-
Are there any easements on the property?
-
Do I have clear title to the property?
-
Are there any environmental hazards
on the property?
-
What is the realistic value of the
property?
-
Am I willing to pay for an appraisal
for my income tax deduction?
-
Am I willing to spend a little time
to complete the gift?
Tax and Financial Implications
Because a life estate agreement is irrevocable,
the donor(s) may be eligible to receive an income tax
charitable deduction. The calculation for the income
tax deduction takes into account the value of the land
and the value of the building. The land is considered
to be non-depreciable. The value of the structure, its
useful life and its salvage value, along with the number
and ages of the beneficiaries are combined to determine
the amount of the charitable deduction.
It is the donor's responsibility to acquire
a "qualified,
independent appraisal" as proof to the IRS of
the value of the property.
Process to Create
While every gift situation is unique, there
are several steps that may be outlined to help clarify
the process.
- You decide. Our philanthropy is a lifelong
process. At some point in your life you may wish
to express your thanks to St. Lawrence and help
ensure a St. Lawrence education for future Laurentians,
and decide that a life estate agreement is a possibility
to explore.
- We talk. You will want to speak with
the planned giving office to make sure that your
wishes can be accomplished at St. Lawrence, and to
create the life estate agreement and any necessary
documentation so that those who come after us can
fulfill your intentions.
- You talk. You may meet with your financial
and legal advisors to evaluate the option, and you
may wish to contact an independent appraiser to review
the property.
- You sign. You make a final review and
sign the appropriate legal documents with your council
and the planned giving office, creating your agreement.
- You relax. You have just connected yourself
with the past and the future as you continue the
good work of those who came before you, and you prepare
the way for those who will come after you. Enjoy
the moment!
What to Expect After Your Plan
is Created
The creation of your plan is the start
of a new relationship with St. Lawrence:
- If you are a new member of the Manley
Society, you will receive letters of welcome.
- As a Manley Society member, you will receive the
society annual report each year, and an invitation
to the annual meeting held during reunion each June.
- You will be recognized as a member in the university
annual Report of Appreciation as a way for us to
say “thank you” and encourage others to
plan for St. Lawrence as well.
This web page does not provide legal or financial advice, nor is it intended as a comprehensive review of the topic. You should consult your attorney, tax advisor and St. Lawrence before making or planning your gift.
