Under this arrangement an individual donates his home or personal residence to the university but retains the right to continue living in the facility until their (and their spouse’s if desired) death. The donor continues to pay all the expenses of owning the property (taxes, maintenance, etc,) but receives a charitable tax deduction on their federal income tax for the gift in the year that it is made. The value of the deduction is less than the fair market value of the property since the donor has retained the value of living in the property for as long as the IRS mortality tables predict the donor will be alive.

To qualify for such a gift the home need not be the donor’s principal residence, only his personal residence. Thus, a vacation home may be donated with a life estate retained by the donor. The furnishings in the home may not be donated under this arrangement and so such assets should be left separately to the university through the donor’s will.

If the donor of the residence later decides to move from the residence and no longer needs the life estate, the donor’s right to remain in the residence has an actuarial value which may be donated to the university for an additional potential tax deduction.

Any improvements on the property made by the holder of the life estate (beyond those needed to simply maintain the residence) that result in an increase in the value of the remainder interest which passes to the university may also qualify for a tax deduction (although not for the simple cost of making the improvements – since the donor enjoys those during his life estate term as well).

If you are interested in making a gift to the university through a Life Estate or wish to learn more about how they work, please contact the UA Foundation or any of the University of Alaska Development Offices.

UAA Development and Advancement Offices
UAF Office of Development
UAS Development Office