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Intrafamily Loans

It’s Time to Open the Family Bank

The start of the twenty-twenties will be remembered by the COVID-19 pandemic. The saying “change is the only constant in life” has become our daily reality.  As it relates to the transfer of your wealth, one opportunity is fortunately defined and clear right now . . . the applicable federal interest rates are still low and you can use them to open your family bank. Intrafamily loans ("family bank") allow you to make loans and transfer appreciation to your children and grandchildren. With AFR interest rates low, there is an opportunistic window available right now to make these loans. The IRS publishes monthly applicable federal rates (AFR) which define the minimum interest rates to charge for intrafamily loans.

"With long-term AFR interest rates still low combined with extraordinary transfer tax benefits, now is the time for affluent families to act."

Jim Roberson, Principal, TRC Financial


loans up to 3 years


loans up to 9 years


loans over 9 years

August 2022 Applicable Federal Rates (AFR)

Leverage with Life Insurance

Life insurance maintains tax benefits as it relates to tax-deferred growth of the underlying policy cash value.

Income tax-free death proceeds paid to named beneficiaries.

The tax deferral features give the child or grandchild the benefit to not worry about asset growth increasing their tax rate or taxable income each year.

The death benefit component of the policy is also a way to help create additional liquidity to Generation II or III.

A collateral assignment on the policy protects the principal loan funded from the family bank.

A single loan design with life insurance allows you to lock in the AFR interest rate today without any future interest rate risk.

Intrafamily Loan Mechanics with Life Insurance

  • Child, grandchild or trust owns the life insurance policy

  • Child is the insured; grandchildren are the beneficiaries

  • Parents loan money and get a collateral assignment on the policy

  • Tax-efficient transfer with significant appreciation and no gift tax

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