Now may be the time to forgive intrafamily loans

Posted by Kim Chen on August 14th, 2020

An intrafamily loan may be an attractive estate planning tool if you’ve already used up your gift and estate tax exemption or if you wish to save it for future transfers. But if you have exemption to spare, forgiving an intrafamily loan allows you to transfer the entire loan principal plus any accrued interest tax-free, not just the excess of the borrower’s returns over the applicable federal rate. It can be a strategy for taking advantage of the increased exemption amount before it disappears at the end of 2025. Of course, if you need the funds for your own living expenses, loan forgiveness may not be an option. We can assist you in determining whether forgiving loans is a good strategy.