end of retained life estate

end of retained life estate

Forum topic posted in Forum on 28 July 2008| 6 comments
audience: | last updated: 28 July 2008
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Joined: 04/04/2001
Points: 75
Donor wants to end RLE. He does not want any additional charitable considerations so therefore do I need to do any additional calculations, e.g., life interest? Is a quit claim deed all I need to do to end the RLE agreement?

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Offline
Joined: 10/14/2004
Points: 110
What will charity do with the property?
Is the charity going to keep the property, or sell it and use the proceeds for its charitable purposes? Unless the property is something the charity can use, most likely they will sell it and take the cash. But, until the property is sold, they will be liable for property taxes, insurance, maintenance, premises liability, etc. The charity may not be all that thrilled with the gift. If they are going to sell it anyway, then why not just sell the property first? That way, life tenant is responsible for all costs/liabilities up to date of sale. Each party is entitled to its own actuarial share of the sale proceeds. If the donor is still feeling generous, s/he can then give his/her share of the cash to the charity.
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Joined: 01/23/2004
Points: 30
End of Retained Life Estate
Been through this process several times. Yes, calculation needs to be made of the value of the remaining life interest being surrendered that can be an additional tax deduction. See Charitable Giving Tax Service page 2-110. Recommend using a quit claim deed + Agreement Renouncing Retained Life Interest in Residence / Farm that stipulates conditions, processes and agreement upon termination. Also recommend similar agreement at start of life estate. Donor could receive tax deduction for additional income, cash upon sale for his interest, or gift annuity for his interest. There is little info on this. Happy to supply info and form for those intersted. Al Zimmerman, director of planned giving, George Fox University. azimmerman@georgefox.edu
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Joined: 06/01/2007
Points: 15
End of Retained Life Estate.
Al, Very beneficial information. I like the idea of the separate agreement in addition to the deed. That agreement can be more specific as to any additional terms between the donor and the chairty. This would keep the actual conveyance of title free from "clutter" and extraneous informaiton. I think most states would approve of the use of a non-warranty deed, although a quitclaim could also work. Tricia Wilson Appalachian State University
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Joined: 03/26/2002
Points: 45
End of Retained Life Estate
We had this situation occur in a case where we only had a percentage interest in the underlying property. The Donor was unwilling to simply agree that the charity was fully entitled to its full percentage value net of selling expenses. Our attorney and I researched this matter and concluded that the charity had NOT fully earned its full entitlement as the calculated life expectancy had not expired from either a tabular perspective or the death of the donor(s). The calculation was used not to merely offer an additional charitable deduction; but to settle the economic value at an amount less than our full percentage share of the property at its selling price (FMV) net of expenses. From a donor relations perspective, you might question whether or not the donor intends for the charity to retain the full value. If so, he is entitled to an additional charitable deduction most likely.
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Joined: 03/09/2006
Points: 15
End of Life Retained Estate
Run the calcs and provide them to the donor anyway! Whether he uses them on his tax return is his choice. Make sure a title company is involved to check for any liens or claims that may be filed that the donor may have forgotten about. The title company would be the best resource for the type of deed they would want to insure the transaction.
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Joined: 04/04/2001
Points: 75
Thank You!
Thank You!
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