OUR SERVICESLife Estates and Charitable Reverse Mortgages
For most people, their home represents a significant portion of their personal net worth. In addition to providing the security of a physical and emotional base, a home can appreciate greatly in value. As a non-productive asset it is usually difficult to extract any economic benefit from one’s home other than by actually selling it. However, there are two charitable gift strategies that may be helpful.
Retained Life Estate
You may donate your residence and still retain uninterrupted use and occupancy for the remainder of your (and your survivor’s) lifetime. The property is conveyed by deed to your favorite charity subject to the life estate. By donating this future interest in your home to the charity of your choice, you will generate a current charitable income tax deduction and exclude the property’s value from your estate for estate tax purposes. This can be done not only with a primary residence but also with a vacation home. With a vacation home, you need not use a life-estate agreement if you do not use the home for the entire year. If, for example, you spend three months of every year there and it remains unoccupied for the balance of the year, a ¾ interest (i.e., those nine months) can be transferred to generate an immediate income tax deduction equivalent to ¾ of the fair market value of the property. You would still be able to enjoy the property for your customary three months each year.
Charitable Reverse Mortgage
This gift enables you to reside in your home while receiving annual income based on its value. Under certain circumstances, which depend on your age and the acceptability of your property to the charity, you may be eligible to receive an annuity, subject to New York law, with payments determined by your age and other IRS factors involving the residential real estate under consideration. Upon transferring title to the charity of your choice, while retaining a life estate, the charity agrees to make lifetime income payments to you while you continue to reside in your home. This charitable reverse mortgage thereby produces additional, needed income from an asset that, while valuable, produced no income for you. Perhaps more importantly, it enables you to maintain your current lifestyle while providing a generous annuity to assist in current and future costs of living.