With a retained life estate, you donate your home to us now, but continue to live in it for as long as you wish.
A retained life estate may be right for you if:
- You do not plan to pass on your home to family or other heirs.
- You itemize your income tax deductions and want to save on income taxes.
- You want to make a significant gift to Georgetown Day School.
A retained life estate is an irrevocable arrangement between you and Georgetown Day School. You deed your home to us in exchange for an agreement that gives you the right to live in your home for life, or a shorter time if you choose. When your retained life estate arrangement ends, your home becomes our property to use or sell. Typically, we will sell your home and use the proceeds.
A retained life estate is an irrevocable arrangement. Once you deed your home to Georgetown Day School, you cannot change your mind and get your ownership back. This requirement assures that the value of your home will go to support GDS.
Give your home, second home, or farm
Most donors create retained life estate arrangements using their home. It is also possible to create a retained life estate with a second home or any other structure that functions as your residence, such as a boat. You may also create a retained life estate with a farm, including raw farm land.
You will be responsible for all regular expenses on your property while you live in it. These expenses include routine maintenance, property taxes, utility bills, and insurance.
- Tax savings from an income tax charitable deduction, if you itemize.
- May reduce estate taxes and probate costs.
You receive an income tax charitable deduction in the year of your gift. The amount of the deduction depends on the value of your home and how long your plan will last. If you cannot use the entire deduction that year, you may carry forward your unused deduction for up to five additional years. By removing your home from your estate, you may also reduce estate taxes and probate costs when your estate is settled if your estate exceeds the then applicable estate tax credit.
How long can my plan last?
You most likely will want to retain the right to live in your home for the rest of your life, or for the lives of you and your spouse. Other possible terms include more than two lives, a specific number of years, or a combination of lives and years.
Ending your plan early
If you decide you no longer want to live in your home for any reason, you can end your retained life estate early either by giving your remaining interest to Georgetown Day School or by selling your property in collaboration with us.
Giving your home to GDS requires:
- That we obtain a qualified appraisal to establish the value of your property.
- That we examine your property and conduct our own analysis of its value. For example, we will want to know if there are any debts, taxes, or liens owed on your property.
- That we conduct an environmental audit. Because GDS would become responsible for cleaning up any environmental problems, we routinely conduct a review to make sure the property has no environmental issues.
Tom and Nettie Smith, ages 78 and 77, are parents of alumni and still live in the house in which they raised their three children. Tom and Nettie are in good health and have no plans to move. Their house has appreciated greatly over the years and is now worth about $600,000. Their children are grown with homes of their own and have no interest in keeping the house in the family.
Tom and Nettie would like to make a large gift to Georgetown Day School, but they don’t feel comfortable giving a significant portion of their investment assets away. They are excited to learn that they can give their house instead while continuing to live in it for as long as they wish. Their lifestyle won’t change as a result of their arrangement. They will receive an income tax charitable deduction of about $337,435* that they can use to reduce their income taxes if they itemize.
- Tom and Nettie can continue to live in their home for the rest of their lives.
- They receive an income tax charitable deduction of about $337,435*.
- They may deduct up to 30% of their adjusted gross income in the year of the gift. If they cannot use their entire deduction in the year of their gift, they may carry forward the balance for up to five additional years.
- Their home is no longer in their estate, potentially saving estate taxes.
- They will provide major support to GDS, currently worth $600,000.
*Tom and Nettie’s income tax charitable deduction depends on the timing of their gift.