November AFR Rates continue lower

The November Applicable Federal Rates continued their downward spiral for next month. The new annual short term rate is down to .35%. Mid-term rates on notes between 3 years and 9 years are now at 1.59% and the new annual long term rate is down to 3.35%. The Section 7520 rate is now a historic 2.0%. Loans to younger generation beneficiaries, Grantor Retained Annuity Trusts ("GRATS") and Charitable Lead Trusts are wonderful tools to lock in some these lower rates.

October Applicable Federal Rates ("AFR")

Every month the government establishes what is known as the Applicable Federal Rate for the charging of interest rates in related party transactions. The Section 7420 rate is now down to 2%. This is a historic all time low water mark for interest rates.

If one wanted to make a loan to a child over $10,000.00 the IRS requires that the loan bear interest at certain minimum rates. For loans repayable within three (3) years [the "short-term" rate] the minimum interest rate in October is .41%. The "mid-term rate" for loans over 3 years but less than nine (9) years to maturity is 1.71% for monthly payments. The "long-term rate" for loans over nine years to maturity is now 3.27%. The use of intra-family loans is a wealth shifting device that can be used to enable a younger generation's accumulation of wealth.