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UNIVERSITY OF WASHINGTON
Retained Life Estate Gifts
A gift of a personal residence or farm with a retained life estate
enables you to continue to use your property for your lifetime and
provide for a future gift to the University of Washington.
If you would like to make a gift to the University How a Retained Life Estate Gift
of Washington, then you may be pleased to know
Works
that you can give a personal residence (including To complete a retained life estate gift, you sign a
deed transferring your personal residence, vacation
a vacation home) or a farm to the University and home, or farm to the University, reserving a life
continue to own it, too. How is this possible? You estate for yourself (or giving a life estate to
someone else, such as your child). If you are married,
can retain a life estate in the property when you
you and your spouse can retain a life estate for your
transfer it to the University. During your lifetime, joint lives and the lifetime of your survivor.
you will continue to live in your residence, use During your lifetime(s), you will be treated as the
your vacation home or operate your farm just as owner(s) of the property and will continue to be
responsible for maintenance, repairs, real estate
you do now. The University will own the taxes, insurance and other expenses associated with
remainder interest, which means that the the property. When you deliver the deed, you
qualify for an immediate income tax charitable
University acquires the right to receive the
deduction.
property upon your death. Such a gift of a
In addition to the deed, you and the University also
remainder interest in a residence or farm is sign a gift agreement describing the educational
purpose your gift will eventually support and
commonly called a retained life estate gift.
outlining the life estate beneficiaries’ responsibilities
regarding the property during their lifetimes.
This brochure explains how you can make a
When all life estates have ended, the University will
retained life estate gift, receive tax benefits now,
sell the property and use the proceeds as you direct
and support the program of your choice in the in the agreement. For example, you can instruct the
future. University to fund an endowment in your name to
provide for scholarships, fellowships, faculty support
or research, or for unrestricted support of the
University or a particular school, college, or
department or the University libraries or museums.
Frequently Asked Questions
Can I give a remainder interest in other kinds
of real estate? You may own vacant land,
commercial real estate, or timberland that you
would like to use for a retained life estate gift.
Unfortunately, the tax code only permits a
charitable deduction for a remainder interest in a
personal residence (including a vacation home) or a
farm. However, a charitable deduction is allowed for
the gift of other types of real estate if made
outright or to a qualified charitable remainder
unitrust. (Charitable remainder unitrusts are
discussed in a separate brochure available from the
Gift Planning office.)
How is the value of the remainder Tax Consequences
determined? You will need to obtain a qualified
appraisal of your residence or farm no more than Income tax charitable deduction: You will be
sixty days before you transfer it to the University or entitled to a current income tax charitable
no later than the date on which you must file your deduction for the value of the remainder interest in
income tax return for the year in which you make your residence or farm on the date you deliver the
the gift. The fraction of the total value of the signed deed. The value of the remainder interest is
property that represents the value of the remainder determined according to IRS rules and tables and
interest is determined under tables published by the will depend upon the life beneficiary’s age, the
IRS and can be computed for you by the gift interest rate the IRS requires you to use for the
planning staff. computation, and the value of the property. The
gift planning staff can help you compute your
What if I need or want to move? If you no charitable deduction. You will be entitled to use the
longer want to remain in your home or operate deduction, up to 30% of your adjusted gross
your farm, you and the University can consider income, in the year of the gift. If you cannot use the
several options. For example, the property could be entire deduction in that year, you can carry the
leased to a third party and you would be entitled to excess forward for up to five succeeding years.
receive the rental payments. Or you and the
University could sell the property and divide the Gift tax and gift tax charitable deduction:
proceeds in proportion to the respective fractional When you make a charitable gift of the remainder
interests at the time of the sale. Finally, you could interest in your residence or farm to the University,
donate your remaining life estate interest to the you may need to file a gift tax return (IRS Form
University and qualify for another income tax 709), but you will be entitled to a gift tax charitable
charitable deduction. deduction for 100% of the value of the gift.
Can I retain or give to another an interest for a If you give a life estate interest to someone else in
term of years? Yes. You may limit your or another lieu of or in addition to retaining a life estate for
person’s interest in a residence or farm to a term of yourself, you will be making a non-charitable gift to
years and give the remainder interest to the that person of the value of his or her lifetime right
University. The information in this brochure applies to live in or use the property. You may have to pay
to a remainder interest after a term of years as well gift tax on the non-charitable gift. Be sure to
as to a remainder interest after a life estate. consult your tax advisor.
Why would I want to make a retained life Estate tax charitable deduction: If you retain a
estate gift rather than leaving my residence or life estate, the entire value of the residence or farm
farm to the University in my will? Your estate will be included in your taxable estate when you
would be entitled to the same 100% estate tax die, but your estate will be entitled to a 100%
charitable deduction for the value of your property estate tax charitable deduction. If you gave another
upon your death regardless of whether you give the person a life estate in the property that begins after
property to the University now with a retained life your death, or if you make a gift of a life estate in a
estate or give it to the University in your will. residence or farm to another person under your
However, by making a gift with a retained life estate will, the value of that life estate may be subject to
now, you will also be entitled to an income tax estate tax. However, your estate will be entitled to
charitable deduction that you can use to reduce an estate tax charitable deduction for the entire
your current income taxes. value of the remainder interest given to the
University.
Five Steps To Making A Retained CONCLUSION
Life Estate Gift
• You (or your advisors) contact the gift planning A gift of a personal residence or farm with a retained
staff to discuss your philanthropic goals and the
life estate is an ideal way to make a significant gift to
residence or farm you wish to transfer to the
University of Washington. the University of Washington while maintaining your
• Gift planning staff provides general information current lifestyle. You continue to use your home or
and specific gift illustrations showing the farm, get the benefit of a charitable income tax
benefits of the proposed gift, and staff from the
University’s Real Estate Office visit and evaluate deduction to offset your current income, and have
the property for acceptance. the satisfaction of accomplishing your philanthropic
• You obtain a qualified appraisal of the property goals.
and the gift planning staff computes the value of
your life estate and the remainder interest. Each retained life estate gift is the product of
• Either the University’s Real Estate Office or your successful teamwork between you, your advisors, and
attorney prepares a deed for you to sign. You
the University’s gift planning staff. The result of this
and the University sign an agreement that
instructs the University as to how you want your collaboration is that everyone benefits - you receive
gift to be used and describes your responsibility
tax benefits and retain the use of your property, and
for property maintenance, real estate taxes,
insurance, etc. the University receives a substantial future gift to
• The University provides follow-up information to benefit students, faculty, facilities or programs.
assist you in reporting your gift to the IRS and
claiming the appropriate tax deductions. If you would like to learn more about a retained life
estate gift, we invite you to contact the Office of Gift
Planning for a confidential consultation. We would
be pleased to provide you with further information
and to prepare a financial illustration for a
Office for Planned Giving contemplated gift.
4333 Brooklyn Avenue NE
Box 359515
Seattle, WA 98195-9515
Tel: 206.685.9473 or toll-free 800.284.3679
Fax: 206.221.2966
e-mail: giftplan@u.washington.edu
web site: www.uwfoundation.org/giftplanning
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