On May 5, the Treasury Department published new proposed regulations for the valuation of life estates, remainders, and unitrust interests based on a new mortality table from the 2010 census. “Use of Actuarial Tables in Valuing Annuities, Interests for Life or a Term of Years, and Remainder or Reversionary Interests,” REG-122770-18, 87 F.R. 26806 (5/5/2022).
The Internal Revenue Service also put on their website spreadsheets with new factors based on Table 2010CM. See “Actuarial Tables,” https://www.irs.gov/retirement-plans/actuarial-tables.
Some observations about the new tables and proposed regulations:
- The tables reflect longer life expectancies, and so life interests will generally be worth more, while remainder interests will generally be worth less.
- The proposed regulations and tables will be effective on the first day of the first month after final regulations are published. A proposed transitional rule allows donors and personal representatives to apply the new tables retroactively to gifts and deaths on or after January 1, 2021. Presumably, amended (or supplemental) tax returns can be filed to elect to use the new tables.
- For calculations that would require a linear interpolation of two factors, the regulations allow “more exact” calculations using computer software. So, for example, if the adjusted payout rate for a charitable remainder unitrust is not evenly divisible by two-tenths of a percent, such as 5.5%, a factor can be calculated using a payout of 5.5% instead of using the tables to find factors for 5.4% and 5.6% and then calculating an interpolated factor (which for 5.5% would be the average of the factors for 5.4% and 5.6%).
Webcalculators (wcalcs.com) has already been updated to allow the use the new tables to determine factors for life estates, remainders, annuities, and unitrust interests, and to calculate remainder values for charitable remainder unitrusts (“CRUTs”) and charitable remainder annuity trusts (“CRATs”). Factors that are in the new tables, such as factors for one or two lives, and the shorter of a term and one life, are available without a paid subscription, although registration is still required.