When are intra-family sales and loans used?


Inter-family sales and loans are used when a senior generation would like to transfer wealth to a junior generation. They don’t necessarily want to make a gift because they’d like to preserve their own estate and gift tax exemption, but the junior generation either has some wealth and is in a position to purchase or we can get wealth to the junior generation so that they have assets in order to make a purchase. That transaction between the generations in our current low interest rate environment is a very effective way to move assets that have either appreciated or will appreciate in the future, from the senior generation to the lower generation, and thus, reduce potential estate taxation.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.