First world problem alert, advice on large loan from family

[Anonymous]

Anonymous wrote:

Anonymous wrote:It doesn't make any difference. Since the interest is the same, I'd take the 40 year. But really there is no significant difference. Maybe if rates drop low again, you'd be be paying a higher rate than people who can refinance. For instance my rate is 2.25%.

Man, I feel good about our 2.75%. Did you pay some points to get that low or just time it perfectly?

No points. It is a 15 year loan though.

[Anonymous]

I’ve done this for my kids (lesser loan amounts) and the previous poster who said the internet rate is too low for the IRS is correct.

[Anonymous]

The interest rate of the loan can't be lower than what a 10 year Treasury bond is paying at the time. Otherwise it's taxable as a gift.

[Anonymous]

Anonymous wrote:The interest rate of the loan can't be lower than what a 10 year Treasury bond is paying at the time. Otherwise it's taxable as a gift.

https://www.nationalfamilymortgage.com/afr-rates/

This link may help, OP

Also, how large, roughly, is this future estate, OP?

https://www.morganlewis.com/pubs/2022/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2023

Right now the estate and gift tax exemption is ~$12.9 million per person but this is temporary and right now is set to drop to ~$5.5 million in 2026.

It sounds like you're all comfortable playing fast and loose and honor system but depending on the estate size it probably makes sense to look into this ASAP. If the estate is >$12 million (as a couple) then you could look into trusts that would allow you to lock in the current, higher, estate tax exemption. I