PURPOSE: This rule is intended as a general guideline as to those matters considered by the director of revenue in determining the value of a life estate and remainders and mortality table used by the insurance department for the purpose of computing the tax on the basis of five percent, under section 145.200, RSMo (1969).

NOTE: This regulation is applicable to decedents dying on or before December 31, 1980.

1. (1) If a will creates a life estate in A with remainder to B, the life interest is valued by multiplying the amount held in trust by five percent (5%), to compute the presumed net annual income from the trust, and then multiplying by the factor applicable to the age of the life tenant from the mortality table of values used by the director as required by section 145.220, RSMo (1969). The value of the remainder interest is then determined by subtracting the value of the life interest from the corpus.

   1. (A) Example. Suppose the will gave T as trustee for John Doe one-third (1/3) of the residuary estate for life, remainder to Mary Doe, his daughter. We need to know the age of John Doe at the date of death of the testator (use age at nearest birthday). If he is forty-nine (49), the computation is as follows:

1/3 of residuary $ 14,694 Times 5% .05 $ 734.70 Times factor of age 49 11.563 220410 440820 367350 73470 Present value of life estate $8,495.33610

The remainder interest of Mary Doe is then computed by subtracting the life estate from the corpus:

Corpus of trust $14,694.00 Present value of life estate $ 8,495.34 Value of remainder interest $ 6,198.66

The valuation of the remainder interest is not affected by any wording that may be added in the will to make the interest a contingent one. If more than one (1) remainderman is involved, then under section 145.240, RSMo (1969), the contingency which will result in the lowest tax should be selected by the appraiser as his/her basis of computation.

1. (2) Testator bequeaths a life estate in the sum of $185,400 to his spouse A, age 70, for her life, and upon her death to B, a daughter, age 45, for her life, and upon her death to a grandson C, to be his absolutely. Computations are as follows:

   A

Value of corpus $185,400.00 Times rate .05 Annual income $ 9,270.00 Times age factor at 70 5.983 Present value of life $ 55,462.41 estate of A, spouse 12 CSR 10-8

B

Value of corpus $185,400.00 Times rate .05 Annual income $ 9,270.00 Times factor for age 45, less factor of age 70 (12.456 –. 5.983 = 6.473) 6.473 Present value of life estate of B, daughter $ 60,004.71 C Corpus of trust $185,400.00 Less life estate of A $ 55,462.41 Less life estate of B $ 60,004.71 Remainder interest to C $ 69,932.88

AUTHORITY: sections 136.030 and 136.120, RSMo 1969.* Inheritance tax rule 61-200 was last filed Dec. 31, 1975, effective Jan. 10, 1976. *Original authority: 136.030, RSMo 1945, amended 1947, 1949, 1965 and 136.120, RSMo 1945.