The Office of General Counsel issued the following opinion on June 23, 2005 representing the position of the New York State Insurance Department.
Re: Valuation of Life Estate
In accordance with New York Real Property & Procedures Law (RPAPL) § 406 (McKinney 1979), will the Superintendent of Insurance allocate the proceeds of the sale of real property between the holder of a life estate age 64 and the remaindermen?
Since the request was not made by a court, the Superintendent will not make the allocation. As a courtesy, however, the Insurance Department can provide an estimate of a life estate valuation.
No additional facts were furnished.
New York RPAPL § 401 (McKinney 1979) provides:
The following interests shall be valued in the manner provided by this article: (a) an interest in real property dependent as to value upon the duration of one or more lives in being, whether such interest is present or future . . . .
New York RPAPL § 402 (McKinney 1979) provides:
In all valuations made under this article, the interest rate of four per centum, compounded annually, shall be employed for all purposes.
New York RPAPL § 403 (McKinney 1979 and 2005 Supplement) provides:
In all valuations made under this article where such valuation depends upon the continuance of, or upon the termination of a life or lives in being, the table of mortality prescribed by section four thousand two hundred seventeen of the insurance law for new, ordinary life policies shall be employed in the manner required by accepted actuarial practice. If, in any case, such table fails to provide required data, other tables accepted by actuarial practice may be employed.
New York RPAPL § 406 (McKinney 1979) provides:
Any court, judge, referee or other judicial or administrative officer by whom any valuation under this article must be made is authorized to transmit to the superintendent of insurance such statement of facts as is necessary to permit the required computation, and such superintendent shall thereupon make the computation and, without charge, certify the same to the court or other officer submitting such statement. Any such certificate shall be conclusive evidence that the method of computation adopted therein is correct.
In addition to the procedures established by the New York RPAPL, the Internal Revenue Code, 26 U.S.C.A. § 7520(a) (West 2002), provides:
General rule. For purposes of this title, the value of any annuity, any interest for life or a term of years, or any remainder or reversionary interest shall be determined--(1) under tables prescribed by the Secretary, and (2) by using an interest rate (rounded to the nearest 2/10 ths of 1 percent) equal to 120 percent of the Federal midterm rate in effect under section 1274(d)(1) for the month in which the valuation date falls.
In Matter of Strohe, 701 N.Y.S. 2d 818 (1st Dept. 2005), the court held that in making allocations between life estates and remaindermen, the procedures of New York RPAPL, rather than of the Internal Revenue Code, should be followed.
New York RPAPL § 406 requires the Insurance Department to make valuations only when requested by a court. However, as a courtesy, the Department can provide an estimate of life estate valuations per $1,000 of valuation based on the date of valuation, age and gender.
For further information, you may contact Principal Attorney Alan Rachlin at the New York City office.