No reduction in income or stock control is experienced but tax-free transfers of future appreciation are achieved at minimum cost. Intra-Family Installment Sale. A sale of real estate, family business stock or other assets from a parent to a child, grandchild or a trust for them has many benefits when interest rates are low. Each month the IRS sets new interest rates for transactions of three years, three-nine years, and over nine years, called Applicable Federal Rates. Even better is the permissible use of the lowest rate during the three calendar months ending with the month in which a written sales contract is signed.
Future appreciation is transferred without taxation.
Moreover, a family installment sale may remove illiquid assets from the seller s estate without diminishing the seller s income. Charitable Lead Annuity Trust. If family beneficiaries receive all of the CLAT s assets at the end of the term, all asset growth occurring during the term of the trust is distributed to such beneficiaries free of gift or estate tax. The annual size of the gift tax deduction is based on the amount paid to the charity and is affected by the IRS interest rate for the month the CLAT is established. The lower the IRS rate compared to the charitable payout rate, the lower the value of the gift to remainder beneficiaries that is subject to gift tax.