February 2, 2012
Authored by: Brent Howard and Cynthia D. Kennedy
The current economy has created a great opportunity for individuals to transfer assets, and future appreciation of such assets, with little to no transfer tax. This opportunity is created by the depressed asset values and historic low applicable federal interest rates (“AFRs”), which are the minimum interest rates, set monthly, permitted by the IRS. (The current AFR for a loan with a term under three years is 0.19%, three to nine years is 1.17% and over nine years is 2.63%.)
The federal gift tax is imposed on all lifetime gifts that exceed the annual exclusion from gift tax (currently $13,000 per person), and the federal estate tax is imposed on the value of all assets and property that an individual owns at the time of death. Each individual, however, has an exemption of $5,120,000 against the gift and estate tax.
A gift during life of an appreciating asset can reap