Applicable Federal Rates (“AFRs”) increases signal an upswing in federal taxation of estate and gift transfers to beneficiaries in the immediate future. Internal Revenue Service (“IRS”) AFR regulation mandates tax accountability of gifts and estates, as well as installment sales and intra-family loans. The latest AFR rate hike will make transfers of all kinds less attractive in the near term. Estate planning professionals recommend review of gift and estate-tax planning and portfolio management of interest-sensitive assets for changes in AFR assignment.
How will IRS applicable AFRs affect my estate?
Taxation of interest rates is a key element of the estate financial planning strategy. In accordance with the most recent federal IRS ruling, Applicable Federal Rates (“AFRs”) will increase under IRC Code § 7520. Since January 2018, AFR rate trending has risen from 2.60% to 3.40% in July 2018.