Legal Blog

Historical Estate Freeze Opportunities

From The Desk Of Herb Fineburg

estateplanningOne of the tried and true estate planning opportunities is to freeze the value of your taxable estate and move the appreciation on your assets to the next generation estate tax free. Congress has tried to eliminate estate freeze techniques but a few still remain such as sales to intentionally defective grantor trusts (IDGTs) and transfers to grantor retained annuity trusts (GRATs). Both of these estate tax planning techniques work best when the interest rates are low. 

As a result of the “Brexit” vote on June 23 for Britain to leave the EU, interest rates have reached historical lows. The short-term and mid-term rates published monthly by the IRS are at a 3-year low and the long-term rate is at a historical low. These IRS rates are called the Applicable Federal Rates which are the lowest interest rate you can charge a family member without incurring a gift tax issue. These historically low rates are expected to persist through August and September. 

In the simplest of terms, a parent would lend a child money or assets at a rate lower than the anticipated rate of appreciation and earnings the child would earn on those assets in the open market. This arbitrage is an efficient wealth transfer technique used by families. Before Congress imposed the minimum AFR rule, parents would lend money or assets without charging any interest at all.

Please feel free to contact us with any questions you may have about implementing an estate freeze.

ABOUT HERBERT A. FINEBURG

Herbert A. Fineburg, a firm shareholder and co-managing principal of the firm’s Philadelphia office, concentrates his practice in the areas of Business Law and Transactions, Mergers and AcquisitionsEstate planningEstates and Trusts,  and Tax Consulting. He is recognized as one of Philadelphia’s most respected business lawyers whose substantial knowledge of tax law provides clients with strategic and cost-saving benefits in connection with commercial transactions, taxation and wills, trusts and estates matters. Known for his ability to resolve complicated matters effectively, Mr. Fineburg has assisted businesses and individuals with the organization of their finances, business and real estate affairs, and the structure of their assets (i.e., in LLCs, partnerships, corporations, trusts or joint ownership). He has substantial expertise in the preparation of buy-sell agreements for co-owners who are family members or are unrelated business partners. In addition, to working on bank financings, business contracts and employment matters for his business clients, Mr. Fineburg also provides advice on business acquisitions and sales, and the resolution of shareholder and partner disputes and buy-outs.

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 120 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eight offices serve individual and corporate clients in the Maryland, Delaware, New Jersey, and Northern Virginia markets, as well as the Washington DC, Baltimore, Philadelphia, and New York City metropolitan areas. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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