Life estate with gift annuity example
Jack and Esther have given the concept of a life estate considerable thought. They have decided that some additional income could meet some of their retirement needs.
The calculation of a life estate for their home produced a figure called the present value of
the remainder interest - this would be the tax deduction if they only did a life estate - without
a gift annuity.
|FMV of home||$350,000|
|Present value remainder||$178,875|
|Two life gift annuity rate||6.2%|
|Annual two-life annuity||$ 11,090|
|Income tax deduction||$69,160|
Because the IRS allows married taxpayers to exclude up to $500,000 ($250,000 for single filers) of gains realized on the sale or exchange of a personal residence, they are able to enjoy more tax-free income from their gift annuity.
Minimum age for life estate/gift annuity combination is 75.