An Alternative to Gifting
April 2, 2009

There is a silver lining to the economy. Because interest rates are at historical lows, it is possible to structure inter-family loans on very favorable terms. Instead of gifting to your children, consider making them a loan. A bona fide loan at prevailing applicable federal rates is not considered a gift and not subject to the annual donee exclusion of $13,000. The use of money is often as beneficial as ownership. If your adult child could leverage inexpensive money and turn a profit of several times the loan interest rate, that would be good. And, it is not that hard to do. The prevailing applicable federal rate for short time loans is currently .72%. For a three year loan that is not bad. Lock in those low rates now and transfer wealth via loan rather than gift.

If you have questions, please contact:
Charles B. Jones, Esquire

CJones@TandLLaw.com
(410) 752-2468