Donations of a residual interest in a personal residence or farm can be measured by the life of one or more people, by a fixed period of years, or by a combination of both. However, they are most often established to work for the life or life of the residents of the property brought. As a result, they are often referred to as “life insurance discount contracts”. Life insurance discount contracts are often considered by people who plan to spend their final years in their current residence. However, circumstances and planning objectives are changing. What happens if the tenant for life can no longer maintain or occupy the property due to age or health issues? What if the donor needs more additional income than an income tax deduction? What happens if the donor wants to make a residual gift, but also wants to transfer a certain property to his heirs? The salvage value is the estimated value of the depreciable or exhaustible land that remains at the end of its useful life. The act of renunciation is often discussed as a method of estate planning. Discover some of the advantages and pitfalls of this type of property transfer. If one or more non-donors are the only tenants of the agreement, the amount of the taxable gift will be obtained by deducting the present value of the remaining interest from the fair value of the property. It is important to note that the calculation of the present value of the remaining interest is NOT the same as that used for the purpose of deducting income tax; Calculations for federal gift tax purposes do not take into account the depreciable portion of the property.15 Therefore, the total fair value of the property is considered non-depreciable property for the purposes of this calculation.

This distinction leads to higher tax deductions than if depreciation were taken into account. If a donor transfers a residual interest to his or her personal place of residence and presents himself or herself as the sole tenant for life, the transfer entitles the donor to the deduction of non-profit gift tax from the amount of the present value of the interest remaining in the year of the transfer.12 Since the gift retains the interest, there are no other tax consequences on donations. After his death, the full value of the property can be included in his estate.13 However, the total value of the property is also deducted from his taxable estate via the deduction of estate tax.14 In most Torrens Title jurisdictions, such as the United Kingdom and the United States, a tenant for life has the right to own and enjoy the property. but as soon as the tenant dies, the property will return to the rest of the man. [8] The main difference is that the lifetime estate is registered by the Registrar General of that jurisdiction and appears on the registered title […].