Life Expectancies – Formulas

Submitted by Robert Geurden on Wed, 2019-06-19 19:34

I’m trying to calculate the length that a note needs to be (to be actuarialy sound) where a person buys a remainder interest following a joint and survivor life estates. The LE is supposed to be based on the IRS’s. actuarial tables. According to the 2000CM Table, the lx factor for a person aged 74 is 66882 the lx factor for a person age 70 is 73001. Table R(2) give a factor for calculating the joint and survivor life estate, and by extension, remainder factors. However, I am uncertain about how that factor would be manipulated to calculate the expected term (in years) of the two life estates. Any thoughts?

— Thanks,

Rob



Submitted by Bruce Steiner on Mon, 2019-06-24 00:53

  • The lawyer handling your estate planning should have NumberCruncher software, which will quickly calculate the value under the IRS tables.  But if you’re buying a remainder interest you would consider the life tenants’ health and family history.  You also wouldn’t use the IRS’ interest rates for life estates and remainder interests, since they’re based on the interest rates on medium term government bonds, whereas an investor wouldn’t necessarily invest that way.
  • What is the relationship between buying a remainder interest and a note?  What are you trying to accomplish?


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