Retained Life Estate (RLE)

Generally speaking, life estate agreements are advantageous for individuals who desire to spend their final years in their current residence.

When potential benefactors who fit that bill want to make a gift of real property to your organization, a retained life estate (RLE) may be an ideal planning vehicle. They get to make a large gift to your nonprofit now, and enjoy a current and potentially substantial charitable income tax deduction yet continue to live in the property.

The core characteristics of an RLE are:

  • An irrevocable transfer of a personal residence or farm by a person (or persons) to a charitable organization.
  • The donor gets a current income tax deduction based on a calculation beginning with the value of the property.
  • The donor retains the beneficial use of the property for his or her lifetime (or for a shorter term specified in the instrument of transfer).

Indeed, the tax advantages of the life estate agreement can be doubly attractive to donors: not only do they get to utilize an income tax deduction for the Net Present Value of the property, but in the long-term the RLE removes the property asset from their estate.

In the planning stages of an RLE, the donor is responsible for securing appraisal for gifting purposes.

After an RLE is made, the donor remains responsible for all the things they were responsible for prior to gifting the property: maintenance and upkeep, taxes, insurance, and the like. Someone from your organization should physically visit the property at least annually.

The following pages take a closer look at the specifics and functions of the RLE, according to these topics:

  1. Who, When, Why
  2. How It Works
  3. Assets That Fund It
  4. Tax Issues
  5. How to Accept

There is considerable flexibility in a RLE gift and for that reason or if you have a specific question about one aspect of the RLE process, please go directly to the relevant pages. To get a more comprehensive sense of what how an RLE works, we recommend starting at the top, with Who, When, Why.