Friday, August 14, 2020
The coronavirus pandemic has pushed small business owners to seek for cash to keep their businesses alive and many of them are reaching out to their families for loans. These loans, with low interest rates are a lifeline.
“People are risking their own money for their brother, sister, kids, grandkids,” says Rebecca MacGregor, an estate planning lawyer with Bowditch & Dewey in Boston, Massachusetts.
Surprisingly, the intergenerational generosity is not rare, as 71% of retirees said they would offer financial support if their family needed it due coronavirus, even if there was a possibility that it would jeopardize their own financial future.
The Internal Revenue Service has announced special interest rates, those rates are as follows:
Short-term — Three years or less: 0.17%
Mid-term — More than three years and less than nine years: 0.41%
Long-term — More than nine years: 1.12%
“You can’t get these rates at a bank! The rates are incredibly low, but the risk is incredibly high. That’s the nature of a family loan,” MacGregor says.
See Ashlea Ebelin, Need A Loan? Tax Rules Now Let You Borrow From Family At Ultra Low Interest Rates, Forbes, August 6, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.