McManus Pens Expert Article for Thomson Reuters Practical Tax Strategies

INTRA-FAMILY LOANS

GIVING THE GIFT OF A LOAN

Intra-family loans can provide tax benefits to both lenders and borrowers if properly structured.

JOHN O. McMANUS

JOHN O. McMANUS is a top AV-rated estate planning attorney and the founding principal of TriState Area-based McManus & Associates (www.mcmanuslegal.com).

When it comes to wealth management, sometimes the gray area is the sweet spot. There are often legitimate opportunities for growing and preserving assets beyond the welldefined, black-and-white tax rules. Identifying these legal loopholes can greatly benefit a client and his or her loved ones, without breaking any laws.

Gifting as a loan, or intra-family loans, is an estate planning technique which, under rules set forth in the Code, allows a significant amount of money to be transferred to a family member with a customized repayment plan—sans the gift tax implications. Also, there are no concrete limitations on the family members who can be borrowers or the trusts for their benefit. With carefully structured lending— through a promissory note, for example—the borrower is able to take advantage of interest rates below those charged by commercial lenders, as the government allows relatives to pay a very low, “safe harbor” interest rate. In a parent-child relationship, the child then pays back the loan over time.

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McManus & Associates Client Featured in New York Times Column on Family Business Succession

Paul Sullivan writes the “Wealth Matters” column for the New York Times, which shares insights on the mindset and strategies of the affluent. Recently, McManus & Associates Founding Principal John O. McManus chatted with Sullivan about the decisions that adult children who are expected to take over a family business face and connected Paul with his client Sharon Madison, a remarkable woman who successfully navigated the challenge of family business succession.

Sullivan’s article leads with Madison’s dedication that kept United Building Maintenance, the business that her father started, on its successful path after he became ill.

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