Cal. Code Regs. tit. 18 § 15552.1

Current through Register 2024 Notice Reg. No. 50, December 13, 2024

Section 15552.1 - Estates, Income and Annuities for Life of One Person

(a) The present value of a life estate in property, the income from which is to be paid annually in an unfixed amount to a single life tenant is computed as follows:

(1) Determine the age and sex of the life tenant as of his or her birthday nearest the date of the gift.

(2) Consult Table A(1) or Table A(2), whichever is appropriate, in Section 15552.8, and ascertain therefrom the life estate factor (the present value of a life estate of $1 per year) for the life of a person of the same age as the life tenant.

CAUTION: Table A(1) is the appropriate table if the life tenant is a male person. Table A(2) is the appropriate table if the life tenant is a female person. The user of the tables should exercise care to refer to the appropriate table in each case.

(3) Multiply the appraised value of the property by the life estate factor obtained pursuant to step (B). The product will be the present value of the life estate at the time of the gift.

The provisions of subdivision (a) may be illustrated by the following example:

EXAMPLE (1).

A gives the annual income from $100,000 to B for life, with remainder over to C. B, a male, at the time of the gift is 40 years of age. Table A(1) indicates that the life estate factor is .78923. The present value of B's life estate as of the date of the gift is $78,923 ($100,000 x .78923).

EXAMPLE (2).

A gives the annual income from $100,000 to D for life, with remainder over to E. D, a female, at the time of the gift is 40 years of age. Table A(2) indicates that the life factor is .84281. The present value of D's life estate as of the date of the gift is $84,281 ($100,000 x .84281).

(b) The formula set forth under subdivision (a) is also used in determining the present value of a fixed annual annuity for life, or of a life estate in property the income from which is to be paid annually at the end of each year in a fixed amount to the life tenant, except that in each of such cases the annuity factor in column 2 of Table A(1) or Table A(2), whichever is appropriate, is substituted for the life estate factor in step (2) of the formula and the amount of the annuity or specified income is substituted for the appraised value of the property in step (3) of the formula. The provisions of this subdivision may be illustrated by the following examples:

EXAMPLE (1).

A gives to B, a male, who is 50 years of age, an annuity of $1,000 per annum for the balance of B's life. As is shown by Table A(1), Section 15552.8, the present value of an annuity of $1 per year for life to a male person of age 50 is 11.3329. Multiplying this factor by $1,000 results in a product of $11,333, which is the present value of B's annuity.

EXAMPLE (2).

A gives to C, a female, who is 50 years of age, an annuity of $1,000 per annum for the balance of C's life. As is shown by Table A(2), Section 15552.8, the present value of an annuity of $1 per year for life to a female person of age 50 is 12.5793. Multiplying this factor by $1,000 results in a product of $12,579, which is the present value of C's annuity.

(c) In determining the present value of a fixed annuity payable at the end of regular intervals of less than one year, the aggregate amount to be paid within a year is first multiplied by the life annuity factor in column 2 of Table A(1) or Table A(2), whichever is appropriate, opposite the number of years in column 1 nearest the age of the person whose life measures the duration of the annuity so as to arrive at the product representing the present value of the annuity payable at the end of each year during the life of that person as of the date of the gift. The product so obtained is then multiplied by whichever of the following adjustment factors is applicable.

(1) 1.0148, if the annuity is payable semiannually.

(2) 1.0222, if the annuity is payable quarterly.

(3) 1.0272, if the annuity is payable monthly.

The provisions of subdivision (c) may be illustrated by the following example:

EXAMPLE.

A gives to B, a male, who is 50 years of age, an annuity of $1,000 per annum, payable semiannually for the balance of B's life. By reference to Table A(1), the life annuity factor in column 2 opposite 50 years is found to be 11.3329. The aggregate annual amount, $1,000, is multiplied by the life annuity factor, 11.3329, and the product is multiplied by the semiannual adjustment factor of 1.0148. The present value of B's life annuity, payable semiannually, as of the date of the gift is $11,501 ($1,000 x 11.3329 x 1.0148).

Note: If the annuitant is a female person, consult Table A(2), rather than Table A(1).

(d) Fixed annuities payable at the beginning of each period must be distinguished from annuities payable at the end of the annuity period. Thus, if the first payment of an annuity for the life of a person is due at the beginning of the annual, semiannual, quarterly or monthly period, rather than at the end of the period, the present value of the life annuity is the sum of the first payment plus the present value of the life annuity, the first payment of which is not due until the end of the period, as determined in subdivisions (b) and (c) above. The provisions of this subdivision may be illustrated by the following examples:

EXAMPLE (1).

A gives to B, a male, who is 50 years of age, an annuity of $1,000 per annum for the balance of B's life with the proviso that B be entitled to the first payment of the annuity on the date of the gift. The present value of the annuity payable at the end of each annual payment period for life is $11,333, as determined in Example (1) under subdivision (b) above. The present value of B's life annuity, the first payment of which is due at the beginning of each period is $12,333 ($11,333 + $1,000).

EXAMPLE (2).

A gives to B, a male, who is 50 years of age, an annuity of $1,000 per annum, payable semiannually for the balance of B's life with the proviso that B be entitled to the first payment of the annuity on the date of the gift. The semiannual amount of the annuity is $500 ( 1/2 x $1,000). The present value of the annuity payable at the end of each semiannual payment period for life is $11,501, as determined in the example under subdivision (c) above. The present value of B's life annuity, the first payment of which is due at the beginning of each period is $12,001 ($11,501 + $500).

NOTE: Reference: Section 15552, Revenue and Taxation Code.

Cal. Code Regs. Tit. 18, § 15552.1