Applicable Federal Rates (AFR) are at an all time low, creating a special opportunity for certain wealth transfer techniques. Two popular techniques that work well when the AFR is low are a Grantor Retained Annuity Trust (GRAT) and a Charitable Lead Annuity Trust (CLAT). A GRAT is an irrevocable trust to which a person (the Grantor) transfers property and retains for themselves the right to receive fixed annuity payments. In a CLAT, a charitable organization receives the fixed annuity payments. If the value of the assets transferred to either a GRAT or a CLAT increase at a rate greater than the IRS assumed rate of return (which is currently 2.4% and will be at a historic low in October of 2.0%), the excess value can pass to the family upon termination of the trust free of gift or estate tax.
Please note however, that the ability to create a short term GRAT may soon be eliminated by legislation.
Other techniques that benefit from a low interest rate are intra-family loans and Sales to Intentionally Defective Grantor Trusts.