The U.S. Treasury has announced that the applicable federal rate under Section 7520 of the Internal Revenue Code (the “7520 rate”) for November 2012 is 1%, matching an all-time low. While this rate has been low all year, it is not likely to drop further. The 7520 rate is used for various purposes, including determining the present value of annuities and remainder interests. It can be a critical tool for planning transfers of wealth using grantor retained annuity trusts and private annuities, particularly in these last two months of 2012, with the unprecedented $5,120,000 gift tax exemption.
In addition to the 7520 rate, the long, mid- and short-term applicable federal rates are likewise at unprecedented low levels. These low rates provide a range of planning opportunities, including intra-family loans and efficient sales of family businesses