Gifts of Real Estate with Retained Life Estate
What is it? A charitable gift plan that allows you to make a current gift of your home to charity, receive an income tax deduction, but still continue to stay in your home as long as you live.
When is it used? When a person wants to make a substantial charitable gift and liquid assets are unavailable or are being preserved to provide for the donor or the donor's family and family members have been provided for by other means, a gift of the remainder interest in a home may be appropriate.
How does it work? A donor (and spouse or co-owner if appropriate) will sign a deed to The Minneapolis Foundation giving it title to the home, subject to a "life estate." You reserve the right to live in the home as long as you live, and also pay all the expenses of keeping up the home, including real estate taxes, utilities, and maintenance. You receive a charitable income tax deduction for the present value of your future gift to The Minneapolis Foundation (based on IRS actuarial calculations). At your death (or at the death of the last to die of co-owners), the home becomes the property of The Minneapolis Foundation. Once it is sold, the proceeds of the sale establish or add to a fund that you create. This fund can be a donor-advised fund (advised by children or others you name), a field of interest fund, a designated beneficiary fund, or an unrestricted community action fund.

If you decide to leave your home while you are still living, the house can be sold and the proceeds divided between you and The Minneapolis Foundation (in proportion to your respective interests, based on IRS actuarial calculations). Your basis in the home is apportioned between your life estate and the Foundation's remainder interest, and you recognize gain only for the difference between your sale proceeds and the basis apportioned to your interest. In many cases, this will be covered by the IRS exclusion for sale of your home. If you wish, you can relinquish (give up) your life estate, giving the entire home to your fund at The Minneapolis Foundation. When it is sold, all proceeds would then go into your fund. The relinquishment of a life estate generates an additional charitable income tax deduction.

The acceptance of a gift of real estate is complicated. The Minneapolis Foundation is equipped to evaluate and accept such gifts so that you can ultimately benefit the charitable interests most important to you. In order to evaluate a potential gift of real estate, the Foundation will work with you to learn the specifics of your particular property, including such things as fair market value, marketability, possible environmental issues and related questions. If a charitable gift of real estate interests you, The Minneapolis Foundation can provide you with written guidelines to assist you in compiling the necessary information. Please be sure to talk to us before making the gift so that we can investigate all of the many factors that may affect acceptance of real estate gifts.

  We're happy to help you find the charitable giving or estate planning option that works best for your situation. We can work directly with you or through your professional advisor. Call us today at (612) 672-3874 or e-mail us at development@mplsfoundation.org.