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# 11. Retained Life Estates and Remainder Interests in Homes and Farmlands, Part 2 of 2

## Summary

Russell James continues on life estates, an under-utilized strategy.

## VISUAL PLANNED GIVING:

An Introduction to the Law and Taxation

of Charitable Gift Planning

**By: Russell James III, J.D., Ph.D.**

**By: Russell James III, J.D., Ph.D.**

## 11. RETAINED LIFE ESTATES AND REMAINDER INTERESTS IN HOMES AND FARMLANDS, PART 2 of 2

**Links to previous sections of book are found at the end of each section.**

As discussed previously, remainder interests in farmland can be gifted in parts. This can be done either by gifting remainder interests in specific acreage in a farm or by gifting an undivided fractional share interest (e.g., 10.72%) in specific acreage. (Such undivided fractional share gifts are also available for gifts of remainder interests in personal residences.) This can provide the donor with tremendous flexibility. For example, the donor could make a remainder interest gift up to the point at which income giving limitations would result in further deductions being carried forward to future years. Making additional remainder interest gifts in future years may be preferable to carrying forward charitable deductions because (1) the deduction will, *ceteris paribus*, be larger as the donor/measuring life is one year older, (2) the deduction will be larger if the farmland has appreciated in value, and (3) the death of the donor, or donor’s spouse if a joint gift, would not result in the loss of carryover deductions.

An additional reason for considering a series of remainder interest gifts would be to coordinate the receipt of tax benefits with the offsetting payment of life insurance premiums through an Irrevocable Life Insurance Trust (ILIT). Although dealt with in detail in another chapter, the basic idea is that the use of life insurance allows the heirs to receive money as a replacement for the value of the home or farmland they will no longer be inheriting. In some cases, the heirs may prefer the life insurance proceeds because life insurance purchased through an ILIT is not normally subject to estate taxes. However, only a limited amount of money can be used each year to pay premiums of ILIT-owned policies without generating gift taxes (in 2015 this was $14,000 annually per donee for each donor). Thus, spreading the deductions over a long period of time can help to match with the life insurance premiums paid over several years.

This combination of transactions, where a donor gives a remainder interest to a charity and then uses the value of the resulting tax deductions to purchase life insurance not subject to estate taxes, can be very attractive. The heirs lose the ability to inherit the property subject to the gifted remainder interest, but gain the opportunity to inherit life insurance proceeds. Because the home or farmland might have been subject to a 40% estate tax, estate tax-free life insurance proceeds could be particularly attractive. Let’s examine the details comparing this type of transaction with less sophisticated charitable planning.

Let’s return to the 59-year-old donor contemplating the disposition of $100,000 of farmland. In this case, suppose the donor is subject to a 40% marginal estate tax rate, a 39.6% federal income tax rate, and a 5% net state income tax rate (after considering the effect of the federal income tax deduction for payment of state income taxes). Further, suppose the donor wishes to benefit both the charity and his children at his death with the $100,000 of farmland. A simple, unsophisticated approach would be to draft a will in which part of the farmland (e.g., 10%) would go to the charity and the rest (e.g., 90%) would go to the children. Assuming that the property appreciates to $125,000 at the time of death, this would result in the charity receiving $12,500 (10% x $125,000). The children’s share would be 90% (90% x $125,000 = $112,500), but their share is first subject to estate taxes of 40%, leaving a net inheritance of $67,500.

Let’s compare the results from that simple planning with the use of a remainder interest deed with retained life estate and an ILIT. As described above, a remainder interest gift in $100,000 of farmland by this age 59 donor generates an income tax deduction of $65,553. The value of a deduction depends upon the marginal income tax rate of the taxpayer. In this case, assuming that the donor is at a 39.6% federal income tax rate and a 5% net state income tax rate (after considering the value of federal deductions for the payment of state taxes), this deduction would be worth $29,236. Using a rough estimate, let’s suppose that this money could be used to purchase a $70,000 death benefit paid up life insurance policy. (As a side note, the amount of insurance that can be purchased from the remainder interest deduction may remain relatively stable in different interest rate environments. A low interest rate causes the deduction to be larger and the insurance to be more expensive, whereas a high interest rate causes the deduction to be smaller and the insurance to be less expensive.) At death, the children receive the $70,000 death benefit from the life insurance policy. However, this death benefit (because of the use of the ILIT) is not subject to estate taxes, so the children receive the entire $70,000. In this case, the children’s inheritance is approximately the same with either charitable plan. However, with the use of the remainder interest, the charity receives the entire farmland, not just 10% of it. Thus, through sophisticated planning, the donor is able to give 10 times as much to charity at death without disadvantaging his children.

As a side note, it is still critical to engage in charitable planning only for those clients who have charitable interests. There are almost always sophisticated non-charitable estate planning strategies that are more effective at transferring wealth to heirs as compared with charitable strategies. But, for the client who wishes to have a charitable impact, these charitable strategies are powerful. One simple approach to identifying a client’s charitable interests is to draw a circle and explain, “You can leave your estate to three groups: people (family), charity, and government. Divide this circle into a pie chart showing how you would want your estate divided between these three groups.” This conversation can quickly identify those who have charitable estate interests and those who do not. Additionally, of use to attorneys and financial advisors is the likelihood that the share assigned to government may be lower than that resulting from estate and gift taxes, thus generating the motivation for exploring sophisticated estate tax planning.

To this point we have been considering gifts of remainder interests with retained life estates in farmland. However, gifts of remainder interests in the donor’s personal residence(s) can also be deducted, although the calculations are a bit more complex. The remainder interest must be in a personal residence of the donor, but it need not be the donor’s primary residence. Thus, for example, the gift of a remainder interest in a donor’s vacation home is deductible.

In fact, any home owned by the donor and used by the donor as one of his or her residences will qualify for a deductible remainder interest gift. This can even include a boat with bathroom, cooking, and sleeping facilities if it is actually used by the donor as a residence.

Calculating the deduction for a charitable gift of a remainder interest in a house is more complicated than calculating the deduction for a remainder interest in farmland. The deduction for a remainder interest in a house will be less than the deduction for a remainder interest in farmland of the same value. This is because farmland does not wear out or depreciate. In contrast, houses, over time, wear out. This expectation of the wearing out (depreciation) of the house must be incorporated in the estimation of the amount of value that the charity will receive at the end of the life of the donor/measuring life.

Returning to our previous example, suppose that the 59-year-old donor gave a remainder interest in a $100,000 personal residence, rather than a remainder interest in $100,000 of farmland. The deduction for the gift of the personal residence remainder interest would be less than for the farmland remainder interest ($65,553 for the farmland v. $44,843 for the home).

How is this deduction calculated? Part of the value of the personal residence is the value of the land on which the residence sits. The deduction for this part of the personal residence is calculated exactly like the deduction for the farmland. Thus, the remainder interest gift generates a deduction of 65.553% of the value of the *land* underlying the personal residence. (The 65.553% comes from the calculation process described previously for farmland.) There is also presumed to be an element of the house that does not depreciate, which is referred to as “salvage” value. Because this “salvage” value does not depreciate it is also deducted at the same percentage as the land (65.553%). The remaining value of the residence, however, is presumed to depreciate. Consequently, this portion of the value of the residence may not be deducted at the full 65.553% used for farmland, but must be reduced by a depreciation reduction factor. In this case, using the example described below, the depreciation reduction factor is .29603, or 29.603%. Thus, the depreciable part of the residence may be deducted at 35.950% (i.e., 65.553% less 29.603%). Combining the parts that can be deducted at 35.950% with the parts that can be deducted at 65.553% results in a total deduction of $44,831 for the $100,000 home.

How is this depreciation reduction factor calculated? The calculation can at first seem to be complex or overwhelming. But, actually, it is simply a matter of copying the correct numbers into a division problem. Aside from the information located in the IRS table C of publication 1459 and the §7520 rate, the only additional information needed is the age of the donor/measuring life and the useful life of the house.

Unlike other areas of tax law where depreciation is incorporated into tax calculations, there are no set years for the depreciable life of a residence in this context. The useful life of the house should be estimated by an appraiser or engineer. The IRS examples use 45 years for the useful life of a house, and so this is often treated as a viable estimation depending upon the condition of the home.

Following the cue from the IRS example for this example, assume that the residence will depreciate over 45 years. This, along with the §7520 interest rate and the donor’s age, is the only information needed to use the IRS tables to complete the calculation. Following the instructions of IRS publication 1459 (www.irs.gov/pub/irs-pdf/p1459.pdf) download table C (www.irs.gov/pub/irs-tege/table_c_2009.xls) and scroll down to the segment titled with “Interest at 2.0 Percent” (or whatever the appropriate §7520 rate is for the date of the transaction). The numerator of the depreciation reduction factor is the R factor at the donor’s age minus the R factor at the donor’s age after the useful life of the house (assuming the donor is the measuring life for the retained life estate). In this case, the numerator is the R factor at age 59 minus the R factor at age 104 (i.e., age 59 measuring life + 45 year useful life of the house). (If the life tenant’s age plus the useful life of the house exceeded 109, which is the highest number on the table, simply use 0 for the R factor at the donor’s age after the useful life of the house.) When using table C with a 2.0% §7520 rate, this makes the numerator 366311.5-51.2339 (or 366260.2661). The denominator of the depreciation reduction factor is the D factor at the donor’s age multiplied times the useful life of the house. In this case, the denominator is the D factor at age 59 multiplied by 45, or 27494.35 X 45 = 1237245.75. Combining the numerator and denominator results in 366260.2661/1237245.75, or 0.29603. This is the depreciation reduction factor used in the previous calculation. In other words, this is how much less the percentage deduction for the depreciable portion will be as compared with the land portion. In this example, the land portion can be deducted at 65.553%. The depreciable portion must be deducted at 29.603% less (i.e., 35.95%).

The process of plugging in the R-factor and D-factor numbers and then subtracting this result from the remainder interest factor in order to get the factor to apply to the depreciable part of the home is a shortcut to getting the result generated by the formula found in the IRS regulations.

This formula is

Where:

n = the building’s estimated useful life, e.g. 45

i = the 7520 interest rate, e.g. 0.02

v = 1/(1+ the 7520 interest rate), e.g. 1/1.02

x = the age of the life tenant, e.g., 59

lx = expected number of persons living at age x out of 100,000 births as set forth in Table 2000CM (available for download at http://www.irs.gov/Retirement-Plans/Actuarial-Tables)

It is possible to calculate this formula directly. The result of calculating the formula directly is the remainder interest factor to be applied to the depreciable portions of the personal residence (not just the depreciation reduction factor). The results should match those from using the shortcut method described above. Although the formula above looks quite intimidating, it can be explained descriptively. Starting inside the equation, this ratio uses the Lx numbers, representing the number of people, out of 100,000 births, expected to be alive at any given age. The ratio is the number of people, out of 100,000 births, alive at the donor’s age+t+1 years over the number of people, out of 100,000 births, alive at the donor’s age. For example, if the donor were 59 years of age, then the first calculation where t starts at zero would be the number of people projected to be alive, out of 100,000 births, at age 60 (87,595) divided by the number of people projected to be alive, out of 100,000 births, at age 59 (88,441). This ratio (87,595/88,411), or 99.08% is the likelihood that a person who is age 59 will live another year. Subtracting this ratio from 1 (in this case resulting in 0.92%) gives the likelihood that a person who is age 59 will *not* live another year.

This bracketed part of the formula identifies the probability that the donor will die during a particular year for each year of the useful life of the home. We start with t=0, in which case the right hand parenthesis also equals zero. In our example of a 59 year old donor, the probability of death in the first year is, as calculated above, 0.92%. The probability of death occurring in the second year is the probability of death occuring within the first two years (left hand parentheses) minus the probability of death occurring in the first year (right hand parenthesis). The probability of death occurring in the third year is the probability of death occurring within the first three years (left hand parentheses) minus the probability of death occurring within the first two years (right hand parenthesis). This probability is thus calculated for each year of the useful life of the home (e.g., 45 years).

This parenthetical calculation gives the percentage of value that will remain in each year, assuming straight line depreciation, for the depreciable parts of the house. For example, if the house is expected to have a 45 year useful life, then by year 20, it would be 44.4% depleted (20/45 = 44.4%), meaning that 66.6% (1-44.4%) of the value would remain. This explains the left and right portions of the parenthetical statement, but not the middle piece. Why would we also subtract 1/(2x the useful life of the house)? This simply reflects the additional depreciation (wear and tear) that occurs for the 6 months required to get to the middle of the year. This assumes that if the person dies during a year, they will die not at the beginning or the end, but in the middle of the year, so the depreciation will be ½ year. For example, the projected remaining share of the value if the donor died in the first year (t=0) would be 1-(1/90), or 98.89%, (the right hand ratio is zero), reflecting the idea that the donor is projected to die in the middle of the year. The projected remaining share of value if the donor died in the tenth year (t=9), would be 1-(1/90)-(10/45), reflecting the idea that the donor is projected to die in the middle of the year and the 1/90 depreciation that occurs during those six months must be substracted.

This final portion of the summation calculates the present value of the future amount. The *v* represents 1/(1+ the §7520 interest rate). If the §7520 interest rates were 2.0%, *v* would equal 1/1.02, or 98.04%. Thus, the present value of receiving the asset in year one is 98.04% of the projected value of the asset. The present value of receiving the asset in year two is 96.12% (from 98.04% X 98.04%) of its projected value in year two. The present value of receiving the asset in year three is 94.23% (from 98.04% X 98.04% X 98.04%) of its projected value in year three, and so on for each year of the projected life of the home. The final adjustment noted by the parenthetical component to the left of the summation symbol increases the present value based upon the idea that the amount will be received not at the end of the year, but in the middle of the year. Thus, if interest rates are 2.0%, the final amount is increased by 1% (multiplied by 1.01 because 1+(.02/2)=1.01) to reflect the value of receiving the asset in the middle of the year, rather than at the end of the year.

Unfortunately, there is no shortcut method for calculating the remainder interest factor to be applied to the depreciable portions of the personal residence if the life estate is for more than one life. If the life estate will last for the lives of two people, then the formula for the remainder interest factor to be applied to the depreciable portions of the personal residence is the following:

Where:

n = the building’s estimated useful life in years, e.g. 45

i = the 7520 interest rate, e.g. 0.02

v = 1/(1+ the 7520 interest rate), e.g. 1/1.02

x and y=the ages of the life tenants, e.g., 59 & 62

lx and ly=the number of persons living at ages x and y as set forth in Table 2000CM (available for download at http://www.irs.gov/Retirement-Plans/Actuarial-Tables)

This can be calculated by hand, in this case requiring a summation of 45 different calculations, one for each year of the useful life of the property. However, it requires more steps than the short-cut method available for single life calculations. The parts of the equation represent the same ideas as in the one-life example. The only difference in the equation is that the middle bracketed portion

now estimates the joint likelihood of the death of both life tenants, rather than just one.

If the calculation for the remainder interest factor to be applied to the depreciable portions of a two-life remainder interest gift appears too daunting, you may request the IRS to furnish this factor to you. To do so requires that you are dealing with an actual contribution (not simply a proposal), and that you forward the sex and date of birth of each life tenant, copies of the relevant instruments, and a statement of the estimated useful life of the depreciable property to the Commissioner of Internal Revenue, Attention: OP:E:EP:A:1, Washington, DC 20224.

A donor may also choose to give a remainder interest in a personal residence where the donor will retain the right to use the property (or give that right to someone else) for a fixed number of years. For example, the donor could deed a personal residence to a charity with the provision that the donor retains the right to use the property for 20 years. In this case, the deduction is based upon the value of the personal residence in 20 years. The current land and salvage value of the building are not depreciable, and so they are assumed to be worth the same amount in 20 years as they are today. The depreciable part of the personal residence will be reduced in value by the fixed number of years divided by the useful life of the building. For example, if a $100,000 residence was estimated to have a useful life of 45 years, with land value of $20,000 and salvage value of $10,000, then in 20 years the estimated value would be $20,000 land + $10,000 salvage + 70,000 depreciable building – [(20/45)x$70,000] depreciation, or a total of $61,111.11. Based on the idea that the charity will be receiving an item of property worth $61,111.11 in twenty years, the deduction for such a transfer would be $61,111.11 multiplied by the remainder interest factor for a term certain of 20 years. These remainder interest factors are published in Table B: Term Certain Factors available for download at http://www.irs.gov/Retirement-Plans/Actuarial-Tables. For a 20 year term when the §7520 rate were 2.0% at the time of the gift, the remainder factor would be 0.672971. Thus, the deduction for this transfer of this future interest in the personal residence would be $61,111.11 x 0.672971, or $41,125.93.

Finally, if the value of the land may be reduced by depletion of its natural resources (e.g., valuable mineral rights), the expected depletion must be taken into consideration in estimating the value of the charity’s remainder interest, although no specific methodology is mandated.

The remainder interest gift allows the donor to retain the use the property for the rest of his or her life. (Actually, it is much more flexible than this, allowing for any period of years or the life or lives of any person or group of people, but such alternatives are rarely used.) What happens if the donor no longer wishes to use the property? Perhaps the property is a personal residence and the donor decides to move away to a warmer climate or to a nursing home. Or perhaps the property is farmland and the donor becomes unable or uninterested in continuing to farm. Whatever the circumstances, either anticipated or unanticipated, the donor still has a variety of options available when he or she no longer wishes to personally use the property.

One easy solution is for the donor to simply rent out the property and take the income. If moving to a distant state, the donor will likely hire a property manager to manage the leasing and maintenance of a residence. It is also possible to sell the life estate to an investor who would then rent out the property, although such transactions are rare. If the charity owning the remainder interest is co-operative, both the life estate and remainder interest can be combined and the property can be sold with normal “fee simple” ownership. (The division of proceeds between the charity and donor must give the charity at least as much of a share of the proceeds as the IRS tables indicate the remainder interest is worth, based upon the donor’s age at the time of the sale.) Most charities holding a remainder interest would be more than happy to agree to a sale and division of the proceeds.

Although less common, a charity could agree to issue a Charitable Gift Annuity (discussed in a separate chapter) in exchange for the donor gifting the life estate. The gift of the life estate would allow the charity to combine the life estate and remainder interest and sell the property whole. Proceeds from this sale could then fund the gift annuity payments. Of course, the same could be accomplished by a joint sale where the donor used the proceeds from his or her share of the sale to then purchase a gift annuity. However, this transaction would require the donor to immediately recognize any capital gain upon the sale of the property, whereas the gift annuity transaction would postpone such taxation. (Conceptually, the donor could even place her life estate interest into a Charitable Remainder Trust prior to a joint sale in order to avoid capital gains taxes. However, this is rarely done because the transaction amounts are not normally large enough to warrant the use of the more complex transaction and because the donor could not use, live in, or take rent from the property after it was transferred to the Charitable Remainder Trust.)

Finally, of course, if the donor were financially capable and charitably inclined, the donor could give his or her life estate to a charity. The gift could be to a charity holding the remainder interest or to any other charity. This is a deductible gift (even though it is the transfer of only a partial interest in property) because the donor would be retaining no interests in the gifted property.

One concern a charity may have about such transactions is whether or not the donor would choose to maintain the property. Of course, a charity could take the attitude that some gift is better than no gift and not concern itself about the risk of the property deteriorating or burning in the meantime. But, suppose the charity wished to maintain the value of its remainder interest – what are its options?

Although unfamiliar to most people, the life estate / remainder interest property division is a very old form of property ownership. Because of its long history, the rules for such ownership are well established in court cases (referred to as common law). These rules require that the owner of the life estate, referred to as the “life tenant,” pay for maintenance, insurance and taxes (a.k.a. MIT) on the property. Should a life tenant fail to pay for these, the holder of the remainder interest has the right to force payment through court action. Some charities like to avoid such legal actions, if at all possible. This is one reason why it is common for charities soliciting remainder interest gifts to require a written “MIT” contract (__M__aintenance-__I__nsurance-__T__axes). By requiring such an agreement, the charity can ensure that the donor understands his or her obligations. Even if the agreement places no more obligations on the donor than those provided for in common law, it can help to resolve conflicts by serving as a reference point for future conversations. This can be especially important in circumstances where the original donor is no longer managing the property due perhaps to incapacity or where the donor was not the life tenant. The typical scenario, where a donor is the life tenant, usually creates few problems because the donor wishes to benefit the charity. However, if the life tenant is hostile to the charity, problems are more likely to arise. For example, a donor could direct in his will that a personal residence could be used by his sister for life with the remainder interest going to the donor’s favorite charity. In this case, the life tenant may have no interest in or connection with the charity. When there is no relationship and the life tenant fails to maintain, insure, or pay taxes on the property, the charity can take one of several strategies. Using a standard approach, the charity can simply enforce its legal rights through court action. Although this path is available, some charities might decide not to enforce their legal rights because of a risk of “bad press.” In this case, it would probably be best for the charity to sell its rights to another investor, who would likely be far less concerned about public relations. If the charity is unwilling to enforce its rights or sell its rights to another investor, then the charity must be content with the land or salvage value of the property remaining at the life tenant’s death. Note that, depending on state law, it may not be wise for a charity to intervene by paying taxes on the property. Unpaid taxes will ultimately result in the forced sale of the property, the proceeds of which will be subject to distribution, in part, to the charity as holder of the remainder interest.

The life tenant has the obligation, either under common law or under a written “MIT” contract, to maintain, insure, and pay taxes on the property. But, what about a life tenant who wishes to make improvements to the residence? Such improvements are certainly allowed by common law, although they must truly be improvements and not diminish the value of the property. What are the tax consequences of making improvements to property in which the remainder interest is owned by a charity?

The indication from IRS private letter rulings is that improvements made to property where the remainder interest is owned by a charity constitute additional charitable gifts. Improvements to a residence, such as the addition of a bedroom, increase the value of the property. The deduction would be based upon the increase in the value of the property multiplied by the percentage attributable to the remainder interest owned by the charity. This would be the same calculation process used previously, but updated for the donor/life tenant’s current age. Thus, a donor who has given a remainder interest in his home to his favorite charity can generate additional tax deductions for any improvements made to his home so long as a charity owns the remainder interest at the time of the improvement.

The charitable gift of a remainder interests in a home or farmland is a relatively simple transaction that begins to demonstrate the power of sophisticated planning. Donors are able to take an immediate tax deduction without making any changes to the way they will use the property for the rest of their lives. Donors can use the value of this deduction to spend on themselves, invest in income producing assets, or even purchase tax-free life insurance for heirs through an ILIT. Although infrequently used, for the right donor and the right charity, gifts of remainder interests in homes and farmland can be a powerful technique. As this simple strategy demonstrates, creative and powerful charitable planning is not just for the wealthy.

## Re: 11. Retained Life Estates and Remainder Interests in ...

Question about the salvage value vs. non-salvage value. Specifically, what part of a home does not depreciate? How does a planner go about deviating from default software salvage values and still stay within acceptable territory for IRS purposes. Example - if the FMV is $350,000, land is assumed to be $60,000 and the home is relatively new, is it safe to assume that the portion of the home that does not depreciate can be higher than a 10% default rate?

## Re: 11. Retained Life Estates and Remainder Interests in ...

Good question. Let me throw out some speculation here. The income interest isn't "accelerated" like in a CRT. With a CRT, it is itself a charitable entity and the income interest is a claim against the charitable entity. Of course the tax code will protect against any extra benefit going to the annuitant. Here the person simply owns a life estate. It is not held as an obligation of a charitable entity; it's just a separate property right. He or she can sell it anytime to anyone. Similarly, the original charity can sell its remainder interest to anyone anytime. If she happens to sell it to a charity, there is no special rule any different than if she sold a car or a hammer or an apple. If the charity pays more than fair market value, then the charity may have an issue of private inurement - especially if the owner was an insider. So, if the donor is selling a life estate to a non-charity, I don't see a need for any valuation. Get as much as you can. But, if the donor is selling to charity, the donor is not a risk, but the charity could be if they pay an excessive amount and it is deemed to be private inurement. If the charity wants to protect itself against a private inurement charge, I would say just keep it reasonable. Use the IRS actuarial tables for the current 7520 rate and the age of the measuring life for the life estate and a reasonable value for the underlying property and you should be fine. If the charity wants to pay more than this, it probably should have some justification for why it is doing so. Again, this is a risk on the charity's side, not the donors. Now, if the donor is wanting to donate the life estate and take a deduction for it, which the donor can do if the life estate is his or her only remaining interest in the property (partial interest gift is allowed here as the donor is retaining no other rights), then you would want to use the same IRS tables to value the gift unless you have some reason why that wouldn't be a reasonable estimate (like a terminal donor). In fact, the donor can even give a partial life estate (assuming the life estate is the only interest owned by the donor) and retain the right to use the property for one month a year - but that is a whole different case. Don't know if this helps?

## Re: 11. Retained Life Estates and Remainder Interests in ...

Hello Russell,

How is the income interest calculated if the donor wants to accelerate her interest and receive her actuarial split of the proceeds. WE aren't sure how to compute her income interst - not sure it is as easy as using PG Manager or if we need to use IRS actuarial tables.