T h e R e t a i... L i f e E s t a... Retain the use of your home while

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T he R etained Life Estate
Frequently Asked Questions
Contact Us
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Phone:
626-395-2927
What if I later decide to move out of
the residence and sell it, or another
life tenant does?
The gift of the property is irrevocable,
but the life tenant and Caltech can
agree to sell the residence jointly and
divide the net proceeds. After the property is sold, the proceeds are split in
accordance with the IRS actuarial
values for life and remainder interests
on the date of the sale.
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Does this type of gift apply to real
property other than my personal
residence?
Federal tax regulations limit charitable
gifts of real property with a retained life
estate to a personal residence or a farm.
The personal residence need not be the
donor’s principal residence. For example,
a vacation home would qualify.
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What if there is currently a mortgage on the property?
Providing the lender consents, the existence of a mortgage does not prevent
such a gift from being made. The donor’s
tax deduction will be reduced and he or
she may have to recognize some income
as a result of the gift. The donor will
remain liable for the mortgage.
The Office of Gift Planning can provide
exact calculations based on your particular
circumstances.
E-mail:
giftplanning@caltech.edu
T h e R e ta i n e d
L i f e Es ta t e
Retain the use of your home while
making a gift that benefits Caltech.
Mail:
Office of Gift Planning
Mail Code 5-32
1200 E. California Boulevard
Pasadena, CA 91125
On the Web:
http://giving.caltech.edu/gp/
Of f i c e o f Gi f t P l an n i n g
This brochure is intended for educational purposes only and is
not offered and should not be taken as legal, tax or other
professional advice. Always consult an attorney, accountant
or other professional advisor before making any material decisions based on any data presented herein. To ensure compliance with certain IRS requirements, we disclose to you that
information contained in this brochure is not intended or
written to be used, and may not be used, for the purpose of
avoiding tax-related penalties.
C al if or n ia I ns t i tu t e o f Tec hn o lo g y
T he R etained Life Estate
A
lumni friends of Caltech can gift their home,
vacation property, or farm, while continuing
their current living arrangements.
How It Works
You make an irrevocable gift of your residence,
vacation home, or farm and reserve what is called
a “life estate” for yourself, your spouse, and/or any
others you wish to include as “life tenants.” You
(or others you designate) continue to occupy the
property for the rest of your life. At the death of
the last surviving life tenant, Caltech takes possession of the property.
Benefits
Special Techniques
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You receive an immediate income tax deduction.
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The property is not included in the value of your
total estate for estate tax purposes.
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Your heirs avoid the probate process and related
expenses.
As an alternative to the retained life estate, you
can use another gift planning tool to address
your personal goals and maximize a gift of real
property. You can donate your real estate to
Caltech to fund a charitable remainder unitrust
(CRUT) that pays you a lifetime income.
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You retain use of the property for your life while
you transfer ownership and take an income-tax
deduction today.
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You have the personal satisfaction of creating a
legacy at Caltech.
The Basics
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You and Caltech agree to create a retained life
estate. The Institute prepares a deed transferring
ownership to Caltech and an agreement setting
forth the responsibilities of the life tenants and
the Institute during the period of the retained
life estate.
You obtain an appraisal for the property in order
to support the charitable income-tax deduction.
Once the property is deeded to Caltech, the life
tenants retain the right to live in the residence
for their lifetimes.
Caltech provides you with a calculation of your
tax deduction based on the appraised value and
the IRS actuarial formula, along with a formal
gift receipt to substantiate your deduction.
The costs of insurance, upkeep, repairs, and
improvements, as well as payments of all property
taxes, are the responsibility of the life tenants.
Example
Donors irrevocably transfer their home,
valued at $500,000, to Caltech. They
receive an immediate charitable income-tax
deduction in the amount of $276,200.
The donors continue to live in the property
while maintaining responsibility for all taxes,
upkeep, and insurance.
When the life estate ends, Caltech takes
possession of the property and sells it to
support the designated program of the
donor’s choice.
Calculations are based on a hypothetical
gift made in January 2012. Please contact
the Office of Gift Planning for a personalized
calculation.
With this method you can generate or replace
income from real estate and still avoid paying
immediate capital gains tax on the sale of the
property.
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