With regards to a personal residence, an outright gift or a transfer of the home subject to the parent retaining a life estate
will result in lost tax opportunities, beyond the loss of the step-up in basis.
Co-owners who share interests in time (life tenants and remainderman), unlike co-owners who share present interests, may not partition life estates
The purchase of life estates
is also limited by the enactment of the DRA.
A charitable life estate
is a gift agreement between a donor and a charity, involving either a residence or farm, whereby the donor gifts the property to charity but retains the right to live in the property, usually until death.
By setting up a qualified subchapter S trust (QSST) the ownership of S stock may be divided into a life estate
and a remainder.
Where life estates
, reversions, remainders, and annuities are valued according to estate and gift tax valuation tables and an election is made to value property at the alternate valuation date (see above), the IRC Section 7520 interest rate to be used is the rate for the alternate valuation date (generally six months after death).
Where still viable, it is important that the sales contract for a RIT involving the retention of a life estate
require that the purchaser (the remainderperson) pay full and adequate consideration for the remainder interest (there is a split in the courts regarding whether adequate consideration should be measured by the remainder interest or by the value of the entire property).
30) He criticizes this nakedly utilitarian approach as being too circular and mechanical and for relying on the dubious assumption that creators of life estates
intend land to pass to subsequent interest holders completely undiminished.
While Revenue Ruling 84-43 reverses the position taken by the IRS regarding life estates
, it would appear that the IRS' reasoning in the private letter rulings about remainder interests continues to control for the pre-1997 Act IRC section 121 exclusion.
In addition to direct transfers and trusts, an individual has a variety of ways to protect assets from Medicaid, including powers of attorney, disclaimers and life estates
Completing this loan required getting lenders comfortable with the "tenants in common" ownership structure where the ownership is syndicated out to as many as six trusts or life estates
," said Wood.
The situation for many surviving spouses with life estates
is becoming untenable.