Wealth Management Update - July 2010

July Interest Rates Down for GRATs, Sales to Defective Grantor Trusts, Intra-Family Loans and Split Interest Charitable Trusts

The July applicable federal rate ("AFR") for use with estate planning techniques such as CRTs, CLTs, QPRTs and GRATs is 2.8%, the lowest rate so far this year.  The rate for use with a sale to a defective grantor trust, SCIN or intra-family loan, with a note of 9-year duration (the mid-term rate, compounded annually), is also down to 2.35%.  Remember that lower rates work best with GRATs, CLATs, sales to defective grantor trusts, private annuities, SCINs and intra-family loans.  The combination of a still low AFR and a decline in the financial and real estate markets continues to present a potentially rewarding opportunity to fund GRATs in July with depressed assets you expect to perform better in the coming years.  However, there is legislation currently pending in Congress which would significantly curtail short-term and zeroed-out GRATs.