Can’t afford estate taxes? Get an intrafamily loan
Abstract: If an estate consists primarily of closely held business interests, real estate or other illiquid assets, it may not have the liquidity it needs to pay estate taxes and other expenses. Life insurance is one option, but another is to borrow the necessary funds. This article shows how borrowing can reduce estate taxes, and notes the requirements for an estate to be able to deduct interest. It also shows how to ensure that an intrafamily loan is a bona fide loan in the view of the IRS. A sidebar offers a real-life example of a loan that did not pass muster.