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Benefiting from a Life Estate Agreement (August 2002)
The Boys and Girls Club is used here as an example, but this can be done with other endowment foundations. A Life Estate Agreement is an excellent way for an older client to invest in a charity through the gift of their home, farm, vacation home, or RV while retaining the full use and rights to the property during their lifetime. With a Life Estate Agreement, they retain a "life estate" and the Boys & Girls Club Endowment Foundation receives the "remainder interest." The advantages include:
An immediate federal income tax deduction - - thereby saving income tax dollars now.
An immediate Montana tax credit. With a Life Estate Agreement donors are eligible for a Montana tax credit of 40% of the charitable portion of their gift up to a maximum of $10,000 credit, per year, per individual.
Some Considerations:
1. A donor can chose to transfer only a portion of the acreage attached to their personal residence or farm and keep or sell the remaining acreage. The tax advantages are based on the portion of the property that is gifted.
a. Donor's age is taken into consideration when allocating the value of the farm or residence between the donor's "life estate" and the tax-deductible "remainder interest" passing to charity. Older donors qualify for larger charitable income tax deductions since their life expectancy is shorter.
b. A vacation home, condo, RV, or co-op may qualify as a "personal residence" if it is used for residential purposes by the donor at least some of the time.
2. After making a gift of a remainder interest by deed to the Boys & Girls Club Endowment Foundation, a donor may continue to occupy the property or:
a. move and leave the property unoccupied;
b. lease or rent the property to third parties:
c. give the life estate to the BGC Endowment Foundation.
3. Improvements made to the property by the donor after the gift is made may qualify for additional income tax charitable deductions.
See Sue's Archives for more "Sue's News"Contact Susan B. Lovely
406-238-7167 or
mobile 406-698-1601
E-Mail: sue@lovelymontana.com
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406-238-7167 or
mobile 406-698-1601
E-Mail: sue@lovelymontana.com
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