06/15/2009 02:23:00 PM EST
Rapkin on New Valuation Tables
The Internal Revenue Service (IRS) valuation tables used to determine the value of a life estate, annuity or remainder interest are required to be updated by the IRS every 10 years. The new tables were released on April 29, 2009, and they reflect an increase in life expectancy. In this Commentary, Stephanie Rapkin examines the new tables and discusses their impact on charitable and estate planning. She writes:
The new tables do indeed reflect an increase in life expectancy or more accurately mortality of the recent population of the U.S. for most ages. Thus, life estates and annuities for most ages will have slightly longer assumed time frames and as a result the transfer value will also increase. However, a comparison of the old tables to the new tables shows that the actual monetary increase is rather minuscule.
For example for a simple life estate the transfer of an asset with a value of $100,000 for a 45-year-old individual at an AFR of 2.4% under the old table would result in a life estate of $52,688, whereas under the new table the life estate has a value of $53,723: a difference of only $1,035. The same facts for a 65-year-old individual results in a difference in the value of the life estates of only $828.
Therefore, the impact on the types of charitable trusts which use a life estate calculation will be minimal. A charitable remainder trust for a term of years obviously is not affected by mortality statistics so there would be no changes in value for such a trust. However, the same is not true for a charitable remainder trust based on life or lives.
Subscribers can access the complete commentary on lexis.com. Additional fees may be incurred. (approx. 6 pages)