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Planned Giving for Financial Advisors

Retained Life Estate — Frequently Asked Questions

  • What happens if my client wants to move out of the property prior to her death?

    If your client no longer wishes to use the property as her personal residence or farm, and assuming the issue has been addressed in the gift agreement, she can move out and find a tenant to rent the property (or lease the farm) for the remainder of the life estate term. She will keep all rental income, but she will remain responsible for the taxes, insurance, repairs, and maintenance expenses spelled out in our agreement.

    Your client also could sell her remaining life estate interest or accelerate the gift of the remainder to Harper College Educational Foundation, or your client and we can agree to sell the property and split the proceeds according to our respective interests in the property.

    Note that if your client makes a gift of the life estate to another individual, she may incur gift tax on the transfer.

  • What if my client wants to make improvements to the home?

    Your client can make improvements to the property, but she may need to get Harper College Educational Foundation’s approval for large improvements that could change the nature of the property. The Retained Life Estate gift agreement will set forth the requirements.

  • Can my client move out and then move back in?

    Absolutely. The property is your client's property to use however she likes during the life estate term. If she moves out for a time, she could lease the property to another and collect the rent before moving back in when she's ready.

  • Can my client use a vacation home to create a Retained Life Estate gift?

    Yes. As long as the property qualifies as a personal residence or farm under federal rules, it can be used to create a Retained Life Estate gift.

  • How do the numbers work?

    Your client's exact benefits will depend on the value of property contributed, her (or her life tenant's) age, and applicable factors (like depreciation adjustment and applicable federal rate).

    You can investigate estimated benefits on our Retained Life Estate.

  • When will my client typically want to establish a Retained Life Estate?

    Retained Life Estates are most commonly used when you client 1) has no natural heirs and the estate will benefit Harper College Educational Foundation in the future or 2) owns a home, vacation home or farm that is remote from children or other heirs who do not want the hassle of liquidating the property at your client's passing.

    When your client has no natural heirs and the property is coming to Harper College Educational Foundation when your client dies, a Retained Life Estate allows your client to claim an immediate income tax charitable deduction for the charitable gift of a portion of the property now, even though nothing else about her situation changes in regards to the property until her death. In many cases, this deduction can exceed 70% of the property's current value, providing a major tax windfall that can be carried forward up to five additional years if the client cannot use the entire deduction in this tax year.

    When your client owns a home, vacation home or farm that heirs don't want, that property can be a wonderful resource for a Retained Life Estate gift. Your client will be able to claim a current income tax charitable deduction for the value of the remainder interest given to Harper College Educational Foundation, and she'll be able to use and enjoy the property for life. When the remainder interest is realized, Harper College Educational Foundation will own the property free and clear. The property will not need to be probated as part of your client's estate and will not be part of your client's taxable estate.

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