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.
Ages
77, 77
FMV of home
$350,000
Present value remainder
$178,875
Two life gift annuity rate
6.2%
Annual two-life annuity
$ 11,090
Tax-free income
$7,364
Taxable income
$3,726
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.
This page was last updated 7-30-2008 13:54:30.
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