A life estate agreement is a way for a person to donate a home or farmland to charity when they are still living without having to vacate the property or give up any benefits while continuing to use the asset during their lifetime. A life tenant continues to receive any benefit the property produces while remaining responsible for the property such as taxes, insurance and cost of maintenance. A charitable tax deduction is received at the time of the gift. The property is directed to charity after the donor passes away. The benefits to the donor of setting up a life estate are:
- Charitable tax deduction up to 30% of adjusted gross income with excess deduction that can be carried over for up to 5 years
- Avoid capital gains tax on appreciated property
- Reduction in gift or estate taxes
- Donated property avoids probate and associated costs
- Satisfaction of making a meaningful contribution to charity