Columns share an author’s personal perspective and are often based on facts in the newspaper’s reporting or from personal experience.

Largely unnoticed amidst this year’s significant events is the current historically low interest rate environment. These low interest rates present an opportunity for making gifts to family members at a low gift tax cost. This article will discuss three possible transfer strategies that are made more attractive by low interest raes.

Intra-family loans. A loan is not a gift because the lender receives a promise to be repaid. For a loan to be respected by the IRS it needs to be a bona fide debt and contain an interest rate at least equal to the monthly published applicable federal rate (AFR). For loans made in September, the short-term (three years or less) AFR is .14% (that’s .0014!); the mid-term (over three years but less than 10 years) AFR is .35%; and the long-term (over 9 years) AFR is 1%. That means a parent or grandparent could loan money to a family member for almost no interest. If the parent or grandparent later wishes to forgive a portion of the loan, they can do so provided the loan was valid and there was no preconceived plan to forgive the loan.

Grantor Retained Annuity Trusts (GRAT). A GRAT is a trust used for estate planning purposes. The basic concept is that the donor transfers property to the GRAT in return for receiving an annuity payment over a period of years. At the end of the GRAT term, whatever is left in the trust passes to the trust’s beneficiaries. A GRAT is effective at passing assets to family members if the rate of return of the trust’s assets