What is a Life Estate Reserved?
An arrangement where a donor executes a deed transferring a house or farm to a church or other Christian ministry. On the deed, the donor retains a “life estate” that grants the donor the right to use the property for life. MBF may be named to receive the house or farm for the benefit of the church or ministry designated by the donor.
The Need
A donor desires to leave his or her house or farm to ministry but would like a tax benefit now.
The Solution
Donors can deed a home or farm to charity but keep the right to use the home or farm for their remaining lifetime.
The Benefits
Tax Deduction – Donor receives a federal income tax deduction for the present value of the remainder interest in the home or farm.
Preserves Lifetime Use – Donor is able to use and control the home or farm while they are alive.
Probate Avoidance – House or farm ownership transfers by deed to church or Christian ministry outside of probate.
The Donor
A person who wants to remain in their home and desires a current income tax deduction.
The Details
Duration – The Life Estate typically lasts for the life of the donor.
Deed Restrictions – The deed of the remainder interest to charity must not be restricted.
Mortgage – It is possible for a donor to make a gift of a remainder interest even though there is a mortgage upon the residence.
MIT Agreement – The donor agrees to be responsible for the maintenance, insurance and taxes on the property during their lifetime.
Want more information?
Download a printable version of Life Estate Agreement information. PDF document.
