Update Regarding Estate Planning Techniques in a Low-Interest Rate Environment

In November, Cleary Gottlieb issued a memorandum discussing estate planning opportunities that are particularly effective in a low-interest rate environment. These techniques include intra-family loans and gifts to so-called grantor retained annuity trusts (“GRATs”), both of which are designed to shift appreciation on investment assets in excess of the published Treasury rate to children or other beneficiaries without any gift tax.

This follow-up note comes in light of the dramatic decline in Treasury rates used in connection with intra-family loans, GRATs and similar techniques.

The rate for valuing the retained annuity for a GRAT is 2.0% for February, 2009. The rates for intra-family loans range from 0.6% to 2.96%, depending on the length of the loan, as follows:

• short-term loan (a term of three years or less): 0.6%
• mid-term loan (a term of more than three years and up to nine years): 1.65%
• long-term note (a term of more than nine years): 2.96%

For more information regarding these techniques, please see the firm’s memorandum dated November 19, 2008, entitled ”Memorandum Regarding Estate Planning in a Low-Interest Rate Environment.”

To discuss any of the techniques described in this email or the memorandum, please contact one of the attorneys in the firm’s Private Clients and Charitable Organization Practice Group.