If You Will®: Short Takes on Estates, Taxes and Trusts - March 2013


Now is the time to consider intra-family loans -

This is an excellent time for wealthy, senior family members to consider the use of loans to other family members as legitimate wealth transfer tools and for other planning purposes. Minimum required interest rates on loans, as set by Internal Revenue Service (IRS) regulations, are now very low, and the federal tax rate applicable to taxable transfers has increased by five percent as of January 1, 2013. This edition of “If You Will” provides a brief overview of a few ways in which intra-family loans can be employed, and outlines some of the associated benefits.

Loans from One Family Member to Another -

Senior family members often lend or give money to their children or grandchildren to buy a home, start a business or get an advanced degree of education. In some cases a loan can be better than a gift. For example, if parents lend a child funds to purchase a home that is purchased with the child’s spouse, followed by the child’s divorce, the in-law spouse may get less than if the funds were a gift. Or perhaps it is important to provide funds equally to all children, but family dynamics indicate that funds for some be provided as a loan rather than a gift.

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