The low interest rate environment provides an opportunity to transfer assets to children and other beneficiaries at little or no gift-tax cost. Although there are several strategies for gifting, two of the most effective transfer techniques involve the use of inter-family loans and/or establishing Grantor Retained Annuity Trusts (GRATs). Both techniques work well in a low interest rate environment and allow for the transfer of assets between generations. The applicable federal rate for a nine-year inter-family loan can be as low as 2.87% (based on the April 2008 midterm rate). If the borrower can earn interest in excess of 2.87%, the growth passes to the beneficiary/borrower gift-tax-free.

The GRAT works in a similar manner, except the assets transferred to the GRAT are still taxable to the donor. The GRAT creates an annuity payable to the donor, which is calculated based on the discount rate of 3.4% effective April 2008 (generally the present value of the annuity equals the value of the assets transferred to the GRAT). Growth exceeding 3.4% passes to the beneficiaries free of gift tax. The rate is 3.4% for April 2008, which is down from 4.4% in January 2008.

For more information on this topic, please contact Brian Carter at 312-980-2994, Mike Calahan at 312-980-2996 or your Blackman Kallick representative.

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IRS 2007 Mileage Rate Set

The standard mileage rates for the use of a car (including vans pickups, or panel trucks) beginning January 1, 2007, is now:

48.5 cents per mile for business miles driven; 20 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service to a charitable organization.