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Applicable Federal Rates and Code Section 7520 Rate for June 2018 – Trending Up

By Gerry W. Beyer

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-21/9af22ec0-7889-4548-926b-a5f0ee57e698.pngThe applicable AFR is the minimum acceptable or safe-harbor interest rate that must apply to intra-family loans to avoid adverse income or gift-tax consequences. From January 2018 to June 2018, AFRs have been trending up, making intra-family loans and installment sales to grantor trusts less attractive.

The 7520 rate for the month in which a lifetime gift or testamentary transfer occurs is used to determine the gift or estate-tax value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. The 7520 rate is equal to 120 percent of the applicable mid-term rate. The 7520 rate also has been trending up, making planning techniques like qualified personal residence trusts and charitable remainder annuity trusts increasingly attractive. On the other hand, grantor retained annuity trusts  and charitable lead annuity trusts have become less attractive.

See Carmen Irizarry-Diaz, Applicable Federal Rates and Code Section 7520 Rate for June 2018 – Trending Up, GTLaw-LegalAdvisors.com, May 18, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.

Posted in:
Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax and Trusts