The “Philanthropy Puzzler” features gift questions fundraisers may encounter in the field, followed by solutions from our panel of experts. If you would like to send us your own “puzzler,” please email us at info@SHARPEnet.com with “Philanthropy Puzzler” in the subject line.
Karen and Dean would like to make a gift of their home and retain the right to live there for the remainder of their lifetimes. They’ve had several discussions with their advisors and the proposed charitable recipient concerning the tax benefits and their continuing responsibility for property taxes, insurance and maintenance of the home. Their only remaining concern is that at some point in the future they may decide it is best to move from the house to a retirement community. They have asked what will become of their home if that happens.
There are a number of alternatives. Karen and Dean could rent the home and enjoy the income for their lifetimes. If they don’t need the income, they could make a gift to the charity of their remaining life interest. This would entitle them to an additional charitable deduction.
Another option would be to agree with the charity to sell the home. The sale proceeds would be divided among them depending on the home’s fair market value, any repair or closing costs, their ages and interest rates at the time of the sale. Alternatively, the charity could buy the couple’s life interest and then sell the entire parcel or—depending on the value of their remaining life interest, their age and other factors—issue a gift annuity that would provide the couple with payments for both of their lives. This would also result in an additional tax deduction. ■