THINK ABOUT THIS NOW!
How does a near zero family loan sound? The terrifically low rate you can use for a short-term intra-family loan is just 0.56% for loans up to three years. Go out up to 9 years and the rate is 1.68%. For loans of 10-years-plus, it’s just 2.61%.
Intra-family loans are ideal for parents (and grandparents) trying to boost future generations. Consider a loan to a son or daughter to start a professional practice or to buy a house. Or give them $1 million to invest and see how they do. Say you loan $1 million to your daughter and she invests in a private equity investment that doubles to $2 million. “I’ve just made $1 million on her balance sheet instead of mine,” explains John McManus, an estate lawyer in New Providence, N.J. who just helped a developer father loan his son the money to invest in distressed commercial real estate in Newark.
Interest rates have been so low for so long, there’s been a steady business for wealth planners using interest-rate sensitive techniques, including intra-family loans, to help the rich transfer assets down generations to avoid the federal estate and gift tax. Now there’s a new sense of urgency—and opportunity—as the Fed is on the verge of increasing rates. The low rates quoted above are good through December. (The IRS publishes new rates each month).
“Think about these transactions now instead of waiting until rates are hiked,
Tax-Free Transfer: Intra-Family Loans Are A Steal Now – Forbes