Trust Loans to Beneficiaries: A Topic of Interest

April 27, 2021

For estate planning practitioners, loans are a versatile tool which can be utilized to accomplish a broad range of goals. The ongoing interest rate environment has generated many unique opportunities, as the Applicable Federal Rate (“AFR” – the IRS-mandated minimum interest rate for intrafamily lending) sits at or near historical lows. While intrafamily loans are a popular mechanism to facilitate wealth transfer, loans also frequently come into play in the trust context. In many cases, trustees can expect to receive requests for loans from irrevocable trusts to one or more beneficiaries. While useful in appropriate situations, loans in the trust context require careful consideration in order to avoid pitfalls and ensure the settlor’s original intent is respected.

To read the rest of Trust Counsel, Andrew Winter’s article, please click here.