Retained Life Interest & Complete Capital Gains Tax Avoidance
Stories of generosity are sprinkled throughout the pages of Scripture. If readers are attentive, they can find people of all ages and backgrounds who gave in a myriad of ways. For example, 2 Kings 4:8-10 reports a simple vignette from the biography of the prophet Elisha. Whenever Elisha would pass through the town of Shunem, he was always welcome to stop at the home of a wealthy woman and her husband for a meal. As the story unfolds, the woman perceives that Elisha is a holy man of God, and suggests to her husband that they build a guest room on the roof of their home and furnish it so that he would have a place to stay at his discretion. This is a simple example of how a person in the Old Testament utilized a non cash asset for the work of God’s Kingdom.
Doug and Beth were devoted Christians who grieved the passing of their only child who died in a tragic car accident. As they looked to fill the void, they plunged themselves into the student ministry of their church. They hosted and led a small group in their home each week. They made their home such a welcoming place that teenagers would often stop by for snacks and conversation after school. Their home became part of the DNA of their church. Having been successful in business, and with no heirs to their estate, Doug and Beth began a season of prayer regarding their estate plan. One of the decisions they made as they planned for retirement was to gift their home to the church. Instead of waiting to give the property as a part of their estate, they decided to make a Retained Life Interest Gift of their home in order to utilize the tax benefits while they were alive.
The Retained Life Interest Gift of their home allowed Doug and Beth to give their home to their church today but retain the right to use and enjoy the home as their primary residence for the remainder of their lives. This allowed them to receive a current tax deduction for the value of the asset, less the value of their right to keep using it. It also allowed for complete avoidance of capital gains tax that would be incurred if they sold the property. In addition, it removed a taxable asset from their estate. Upon their deaths, the home would be sold and the proceeds directed to the student ministries of their Church. Careful planning created a “win-win” for Doug and Beth and their Church’s value to touch the lives of teenagers with the gospel.
Like the wealthy couple from Shunem, Doug and Beth creatively found a way to use a non cash asset as an act of generosity. Neither couple was extraordinary, but rather illustrate two examples of everyday believers who were passionate about serving Christ. When the heart is inclined to generosity, creativity will reveal itself.
What is a creative way that you can utilize a non cash asset as a means of funding the mission, vision and values of your church? What tax solutions might be revealed if you were to explore the possibilities? Generosity has never been about giving what you don’t have. It always has been and will always be about stewarding what God has already entrusted to you.
