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Low interest rates may benefit estate planning

Lower interest rates have meant many people are refinancing their car or home loans. This may be an excellent way to save money long term, but many don’t realize that they could be overlooking other possible opportunities. Low interest rates may help people in California increase the value of their estate. This all means that this may be a great time for families to review their strategies for estate planning.

The reason these interest rates may matter is that current exemptions for the transfer of wealth may change in 2026 and may even experience further changes in the future. Applicable federal tax rates can change month to month and a lower rate means that heirs may receive more money in a transfer. Some people decide that simply making a cash loan is the best option in this instance, but there are other choices that may make more sense for others.

Certain types of trusts may benefit from lower interest rates, like a grantor retained annuity trust or a charitable lead trust annuity. These trusts allow one to transfer assets into a trust with no applicable estate taxes, as the person setting up the trust pays an annual annuity payment instead. Lower interest rates make the annuity payments lower, which means the assets in the GRAT or the CLAT experience more appreciation and a larger distribution from the trust.

Some of these matters will depend on a person’s particular financial situation here in California. It is best when making estate planning choices to speak with an experienced attorney. An attorney can consider numerous facets of a person’s life and make the best recommendations for that individual. This way, he or she can rest assured that an estate will be distributed as that person desires.

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