Remainder Interest in a Personal Residence

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Supporters who contribute a remainder interest in their personal residence give a generous gift to the hospital without reducing their personal income during their lifetime.

They also receive a tax deduction at the time of the gift.

Example

Mary Smith (age 70) is a widow with no children or dependents.
She receives Social Security payments and her deceased husband's substantial pension.
This combined income places her in the 35% marginal tax bracket.
Her home has a value of $600,000.
Mary decides to increase her after-tax (spendable) income by deeding her home to the hospital.
She reserves the residence during her lifetime for her use (called “reservation of a life estate”).

Using January 2008 government tables, Mary's gift will be valued at approximately $312,000.

Mary will be able to deduct this amount on her income tax returns.
Donors are allowed to deduct 30% of their total adjusted gross income for gifts of appreciated assets.
As a result, Mary will be able to deduct a portion of the $267,000 during the first year of her gift.
The remaining deduction can be carried forward for up to five additional years.
At her death, Mary's home will belong to Childrens Hospital without any probate court involvement.

NOTE: Although the information set forth herein is believed to be accurate, you should consult your attorney or other tax advisor prior to taking any action.