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Retained Life Estate

A retained life estate is a gift plan defined by federal tax law that allows an individual to donate her home or farm to a charity while retaining the right to live in it for the rest of her life.

The donor irrevocably deeds her home or farm to the charity, but retains the right to live in it for the rest of her life, a term of years, or a combination of the two.  The donor may also use a vacation home to create this kind of gift.  The donor receives an income tax deduction for the remainder value of the home to the charity, subject to IRS 30%/50% limitations30_50_Deduction_Limitations.

While the donor retains the right to live on the property, she continues to be responsible for all routine expenses - maintenance fees, insurance, property taxes, repairs, etc.  If the donor later decides to vacate the property, she may rent all or part of the property to someone else or sell the property in cooperation with charity.

When the retained life estate ends, the charity can then use the property or the proceeds from the sale of the property for the purpose the donor designates.

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