by Amy Feldman
Posted by Greg Lipinski
When times are tough, people tend to hold on to what they have that much more tightly. But for those who can get beyond that psychological response, there's a silver lining in today's combination of depressed asset values and low interest rates: Transferring assets to the next generation has rarely been less costly.
That's because depressed valuations allow you to get those assets out of your estate and over to your kids with less gift tax, while low interest rates create additional advantages for those who use certain wealth-transfer vehicles or intra-family loans. In fact, with the Federal Reserve cutting interest rates, the rates set by the Internal Revenue Service for use in one of the most popular wealth-transfer vehicles, known as a grantor retained annuity trust, or GRAT, is now at an historic low of 2.4%, down from 3.4% in December. The rates for intra-family loans are at similar historic lows, now just 0.81% for a short-term loan.
"If the markets are going to recover, then let that recovery be on your kids' balance sheet rather than yours," says Don Weigandt, a wealth adviser at J.P. Morgan Private Bank in Los Angeles. "The major issue is psychological. It's the brain battling the heart."
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