In Revenue Ruling 2010-18, the IRS published the applicable federal interest rates for July, 2010. These are some of the lowest rates in the past thirty years, and as far as I can see,some of the lowest rates in modern history. For example, you can sell assets in July in exchange for a promissory note with athree year termand an interest rate of 0.61%. Or, you can sell assets in July in exchange for a promissory note with a nine year term and an interest rate of 2.33%. Or, if you have previously sold assets to a trust for estate planning purposes, you could re-finance the note at these historically low interest rates. These low rates allow more of your assets to grow outside of your estate and pass to thenext generation free of estate taxes.
In Revenue Ruling 2010-18, the IRS published the applicable federal interest rates for July, 2010. These are some of the lowest rates in the past thirty years, and as far as I can see,some of the lowest rates in modern history. For example, you can sell assets in July in exchange for a promissory note with athree year termand an interest rate of 0.61%. Or, you can sell assets in July in exchange for a promissory note with a nine year term and an interest rate of 2.33%. Or, if you have previously sold assets to a trust for estate planning purposes, you could re-finance the note at these historically low interest rates. These low rates allow more of your assets to grow outside of your estate and pass to thenext generation free of estate taxes.
At least three factors create an ideal environment for entering into an estate planning transaction:
(1) low interest rates, (2) relatively low values in real estate, stock, and other markets, and (3) the likelihood of future inflation. I believe that all three of these factors are in place at the present time, making this possibly the best time ever to enter into an estate planning transfer.
It is true that the estate tax laws are in a state of uncertainty. At the present time, no one knows whether theestate tax exemption will be $1,000,000 per person or $5,000,000 per person in 2011. In my opinion, if you have an estate in excess of $2,000,000, the best course is to planto avoid the estate tax even if the exemption is only $1,000,000 per person, and make your plans flexible enoughso that you can adapt toany changes in the law.
By taking advantage of today’s low interest rates and low market values, you will have greater peaceof mind,you will have more optionsto allow you to adjust to future conditions, and you will potentially save millions in estate taxes.