[WSBARP] Valuing a Life Estate Interest

[Eric Nelsen]

I think it needs an appraiser. Valuation depends heavily on what restrictions there are on the interest, and also of course on the fact that ownership is limited to the life of the grantee, even when transferred to another person.

A true "life estate" as a fee interest is pretty rare, and if there is a trust involved I would guess that the trust provisions define or otherwise limit the person's use of the property. Those limits/restrictions can be substantially different from a true life estate, and if more restrictive also mean that the value of the interest is less. Then there is the discount for lack of marketability-who wants to buy a right to live at a property that only lasts until the seller dies?

IRS has a formula for valuing a life estate but that's more for tax purposes and I think it tends to drastically over-value the interest compared to actual market value.

Sincerely,

Eric

Eric C. Nelsen
Sayre Law Offices, PLLC
1417 31st Ave South
Seattle WA 98144-3909
206-625-0092
eric at sayrelawoffices.com<mailto:eric at sayrelawoffices.com>

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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of deborah at neillaw.com
Sent: Thursday, September 16, 2021 11:11 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Cc: wsbapt at lists.wsbarppt.com
Subject: [WSBARP] Valuing a Life Estate Interest

Hello,

I have a situation where a person has a life estate in property held by a trust.  The additional money in the trust is not sufficient to pay for the property long-term and the trustee is considering selling the property.  As a part of that transaction, we would want to know the value of the life estate interest so we could reach some agreement with the beneficiaries (post life estate).

I saw something on the internet about valuing a life estate, but I thought it would be wise to see if anyone has a person or chart to recommend for valuing life estates.

Thank you.

Deborah Jameson
(Pronouns: she/her/hers)

Neil & Neil, P.S.
5302 Pacific Avenue
Tacoma, WA  98408
253-475-8600
253-473-5746 FAX

If your matter is urgent, please call my office.  Also, this message is not encrypted and it may not be secure or protected by attorney-client privilege.

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