In 2021, the Music Academy realized the gift of a retained life estate. As the new gift planning officer, I hadn’t worked with retained life estates. Little did I know what I was in for. The Music Academy had, in 2008, agreed to ownership of a 16-acre avocado ranch and home in Santa Paula, the residence of one of our alums. When the alum passed, all operations of the ranch fell to the Academy.

Here are the top 10 lessons I learned from working with such a complex gift!

1. Gather your experts: A working ranch is a complicated asset. There are water rights, crop insurance, employees, and more. To assist in managing the property, I gathered experts – a CPA, our board president, an estate attorney, and a wealth planner. This ad hoc committee meet regularly for six months to assist with decision making, choosing a realtor, choosing a buyer, and be an all-around sounding board for all the issues that came up. “What issues?” you may ask. Everything from cleaning out the house and a broken main gate to when to harvest the avocados (right before Cinco de Mayo, in case you were wondering).
2. Visit the property: While we had finalized the agreement in 2008 and have visited regularly with the donor, we have never gone back to inspect the property. There were issues with the home and it’s state, determining ownership of the farm machinery, and a long-term employee. Many experts will tell you to hold regular inspections. As the property is yours, you need to ensure that it is well maintained.
3. Farm knowledge: Having owned a farm previously, I have had experience in understanding water rights, crop insurance, harvest windows and the like. If you are considering a life estate, make sure you have someone on your team, or get an advisor, who can assist in understanding all that such a property would entail. Of course, now I know a bit more about avocado harvests!
4. Insurance: What kind of insurance might a working ranch require? This goes beyond typical homeowner insurance matters. Research was also needed for insurance concerning potential crop failure as well.
5. Share knowledge: I worked closely with the trust attorney and trustee. From assisting with cleaning out the house, to being part of the memorial celebration, my team and I were involved in all aspects and details of managing the property. We developed a nice relationship with the advisors so we could assist when needed, knowing that our alum would want us to honor her memory in this way. I would recommend starting this relationship earlier, as we didn’t until the gift had matured.
6. Institutional capacity: Guess who got called when the harvest workers couldn’t get in the main gate? And guess who called the gate repair to fix it? As the gift planning officer, I was the point person for the CPA, the bookkeeper, anything that broke at the ranch, the water board, the real estate broker, the trust attorney, the trustee, and many more. Not every organizations has a dedicated gift planning staff member. If you don’t, could you hire someone to assist you with matured life estates? What is the cost/benefit of hiring someone to assist? If you don’t have the resources to hire someone, how can your staff/team divide the duties so you can maintain your current workload with the addition of managing a property? Of course, not all properties are working ranches, however when you accept a retained life estate, it is good to know if you can now or in the future manage this gift so that you can fulfill donor intent and realize the gift.
7. Be kind: The trustee was a long-time personal friend of the donor. While realizing and liquidating a life estate certainly is a real estate transaction, it is good to remember that some of the people that you will interact with had long-term relationships with the donor. That is why the Academy offered to have a musical artist at the memorial service, that our CEO and I attending the service, and that we interacted with those in attendance to offer our condolences.
8. It takes time: From the maturity of the gift to selling the property, there were two harvests, multiple meetings, many site visits, and a memorial service. The property sold a little more than six months after the ranch came under the Academy’s management. And, the gift was made in 2008 and matured in 2021, 13 years. Be prepared for a gift such as this to take time.
9. Educate: Many times, when other staff heard of the avocado ranch, they asked when we could go visit and have some guacamole! After laughing heartily (and letting them know that I wouldn’t be giving them free avocados as I wanted our harvest to make money so that the expenses we were incurring would be covered), I used it as an opportunity to explain what a life estate was, how generous the donor had been, and how complicated and lovey a gift it was. Then, I would share with them that perfectly good avocados were at the farmer’s market and they should avail themselves of these for guacamole.
10. Thank: When it is over, thank everyone. Thank the realtor who sold the property. Thank the trustee who cleaned out the home. Thank the CFO who reviewed and signed all the documents. Thank your staff accountant who paid the insurance bills and negotiated taking on the long-term employee during the ownership period. Thank the ad-hoc committee (perhaps taking them out for margaritas and guacamole!). It takes a group to make it happen and when another estate comes along, you want this amazing team of folks to join you again on another gift journey!