Expediting wealth-transfer decisions can reduce exposure to gift and estate taxes. Vehicles exist to allow assets with potential appreciation to be gifted without triggering these taxes. Today's low interest rates make these vehicles even more attractive by reducing the effective value of gifts.

The U.S. tax code has provisions for three widely used gifting techniques that are particularly powerful in today's tax, interest rate and investing environment.

Intrafamily Loans Satisfy Multiple Needs in a Tax-Efficient Way

A properly structured intrafamily loan can allow the recipient to invest loan proceeds at a higher level of return than the repayment schedule, resulting in a tax-advantaged transfer of wealth.

A Grantor Retained Annuity Trust (GRAT) is a Powerful Tool for Transferring Wealth

A GRAT is an irrevocable trust. The grantor transfers assets in return for an annuity for a specific term of years. Remaining assets are distributed to the beneficiary free of gift or estate tax.

A Charitable Lead Annuity Trust (CLAT) Combines Charitable Giving with Wealth Transfer

With a CLAT, you make charitable gifts from a trust. After a period, any remaining assets are transferred to a beneficiary without gift or estate tax. Low prevailing rates increase a CLAT's potential.

“Two broadly accepted maxims can be applied to estate planning today; the first is that it is better to give than receive, and the second is that there is no time like the present.”
Why act now? Low rates, favorable IRS regulations and appreciable assets.
Low interest rates enhance gifting strategies

Prevailing interest rates have a significant effect on the potential advantages of these strategies. Today's historically low rates may not be available for long.

Current IRS regulations can be advantageous

These strategies are well-established vehicles under current IRS regulations. But these provisions have been challenged in the past, and their future is uncertain.

Potential asset appreciation works in your favor

With these strategies, tax benefits increase with asset appreciation. Holders of assets with high upside potential should consider acting now.

  • This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. ©2016 The Bank of New York Mellon Corporation. All rights reserved.