Charitable planning often plays an important role in a donor’s estate plan. The following PowerPoint shows the advantages of using a life estate to help charity and also to help the donor’s estate planning. As illustrated in the PowerPoint, the donor contributes a primary home or vacation home to a public charity during his lifetime. However, the donor continues to reside in the house as long as he and his spouse are living. Upon the second of their deaths, the home belongs to the charity. The charity can use the home for its own purposes or sell it.
A life estate gives the donor a current income tax deduction and also removes the asset from the donor’s estate. The tax deduction can be used to fund an insurance policy which could be owned in an Irrevocable Life Insurance Trust. At the end of the day, the donor has supported his favorite charity, removed a valuable asset from his estate, and taken advantage of the current income tax deduction to purchase life insurance which can pass to his family tax free. It provides a "win win" for all involved.