4. Intra-Family Loans
An individual can make loans to family members at lower rates than commercial lenders without the loan being deemed a gift. Key characteristics of this strategy include:
• An intra-family loan allows an individual to assist family members financially without incurring additional gift tax.

• A bona fide creditor relationship, including the payment of interest, is established.

• Wealth can be shifted if the loan assets are invested by the borrower and earn a higher return than the required interest rate.

• Interest is paid within the family rather than to a third-party lender.

Entering into new intra-family loans or refinancing existing loans remains a timely opportunity as interest rates continue to be very low.

These are just a few of the strategies that may be considered for achieving wealth planning goals. Although it is always important to work with qualified professionals when choosing and implementing planning strategies, it is even more important this year due to the uncertainty of tax reform, retroactive or otherwise, that could impact some of the planning strategies discussed above. To address some of this uncertainty, planners may consider the use of additional techniques—such as disclaimers, formula gifts, and QTIP provisions—to add flexibility and minimize potential gift tax exposure.   

Caroline McKay is a senior wealth strategist for CIBC Private Wealth Management in Boston, with 14 years of industry experience. In this role, she is responsible for developing integrated wealth management solutions and providing comprehensive estate and financial planning services to high-net-worth clients.

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