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How is the value of a co-life tenancy figured? I am in

How is the value...

How is the value of a co-life tenancy figured? I am in divorce proceedings and I am co-life tenant with my husband.

Lawyer's Assistant: What state are you in? It matters because laws vary by location.

Maine

Lawyer's Assistant: What steps have you taken so far?

I engaged someone as an expert witness but I don't think he knows the legal aspect. He computed the value based on rental income but he fractured 43% to go to the remainder man. My understanding is they have no rights to the property or income derived from it until all life tenants are deceased.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

Not that I can think of.

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Answered in 20 hours by:
3/19/2018
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Customer reply replied 4 months ago
I will wait - I need an answer.
Attorney2
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Welcome to JA and thank you for your question. I will be the Attorney that will be assisting you.

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I just want to clarify that you are referring to a life estate.

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Customer reply replied 4 months ago
the verbiage is co-life tenancy referring to me and my husband who has filed for divorce.

I see what you are saying that the life tenant and the remainderman's interests will be different. The way this is generally calculated is based on the remainderman's value. You want the actual value of the life estate. I am going to check case law for the formula, if there is a specific formula.

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All I am seeing is 50% of the total value. That is not a helpful answer because that is obvious. Let me dig a little deeper.

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Customer reply replied 4 months ago
Ok- in this case the remainder man will inherit, after we are both gone, a house worth over 400,000. Seems like enough to me. House is only worth approx 313,000 now. It can be rented for minimum of 1,400 a month now and my understanding is that the remainder man has no entitlement to the rental income - I’m 62 so that equates to quite a bit of money.

" House is only worth approx 313,000 now. It can be rented for minimum of 1,400 a month now and my understanding is that the remainder man has no entitlement to the rental income - I’m 62 so that equates to quite a bit of money."

You are 100% correct. The rental income is the key. The issue is actual length of time of the life estate. https://www.cumsar.com.au/our-services/life-interest-valuation.html

"Appraisers only rarely run into requests to appraise life estates, they are not typical and you can’t just put a quick blurb into your report and solve their valuation. Thus life estate interest analyses usually require a narrative report or at least an attached narrative report addenda that details the life estate analysis.

If you have read any of the text books or other articles about appraising a life estate in a real property it looks like a relatively simple step-by-step process that almost anyone can follow and complete. The problem is that appraising a life estate can become a lot more complicated once you discover more about it.

A life estate interest can be established in any type of property. Often life estates are conveyed in single-family homes to take care of someone that the original fee simple owner doesn’t want to see homeless or is concerned that without the protection of the life estate they may have to struggle with housing to survive.

Some life estates are conveyed when only a portion of a real property is owned. It may have made sense to convey a life estate when a Will was written many years ago but time often sees changes in ownership interests. So a simple life estate may become a relatively complex partial ownership interest analysis with multiple fee owners, multiple life estate owners and multiple remainder-men.

Some life estate documents are detailed and spell out who is responsible for taxes, insurance and maintenance while others are sparse, creating the life estate in only a few words, and do not provide detail. The more assumptions that an appraiser has to make about a life estate the more likely it will be that his or her analysis will be questioned by the IRS or the courts. Thus it is important to read the conveyance documents closely and if you have access to the estate attorneys talk to them about the details. You can’t appraise an interest in real property if you don’t understand it.

Life estate appraisals rely on a market value opinion of the fee estate interest in the real property, an opinion of the market rental rate and the selection of a reasonable discount rate for a discounted cash flow analysis. So having an appraisal report that concludes a current market value and a market rental rate is an important starting point.

If the assignment begins as of a retrospective date you must deal with all of the analyses beginning in the past and moving forward. If there are requirements to provide retrospective, current and prospective values there may be a great deal of appraisal work required to complete the assignment.

Using an appropriate mortality table is important, and the table that you use as a basis for your appraisal report should be made part of it. Add the table to your Addenda.
Life estate appraisal sources also suggest including the Will or document that established the life estate also be included in the report. I would go a step further and suggest appraisers include their appreciation tables, expense estimates and discounted cash flow analysis tables in their reports." http://www.appraisalarticles.com/Real-Property-Appraisal/Real-Property-Appraisal/Special-Purpose-Appraisal//4526-Appraising-Life-Estates.html

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Estimate the fee simple market value of the property

Estimate the term of the life estate.

Calculate the rental income on the mortality tables. https://www.irs.gov/retirement-plans/actuarial-tables

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Customer reply replied 4 months ago
There are so many ways to look at it. For me it was my security for life. Free place to stay with excellent rental income. I am 62 with a life expectancy of plus/minus 86 and a supposed expert calculated it was only worth $80,000 - preposterous in my opinion?

There is no question that you are correct that the remainderman's interest is not the proper valuation. Feel free to share the information that I provided.

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Customer reply replied 4 months ago
I appreciate very much your responses - I will touch base tonight when I get home and rate your services. Also I have additional questions.

Thank you for using JA. We appreciate your business,

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Customer reply replied 4 months ago
It is a complicated situation apparently. We have lived on the property know as*****for 12 years. There is a house and a garage that has been made into an apartment. We have alternately lived in the house or garage and rented out the other for income. The co-life tenancy is for his residence. I am being told this does not include the garage as we are currently renting it out for income so the valuation only includes the house rental value. I personally believe this is preposterous.
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