If your estate holds a lot of stock or other illiquid assets, you may be facing a liquidity crisis and could be forced to liquidate any of these assets in order to pay estate taxes. So what can you do to prevent this from happening? One possibility is to considering taking out a Graegin loan.
This type of loan allows you to borrow money from a family trust or other decedent and family member controlled entities in order to pay estate taxes. The advantage of this is that you can immediately deduct the interest on the loan even though it will not be paid for many years. This interest expense will reduce the amount of estate taxes owed.
While Graegin loans are perfectly legitimate, they do not always come without challenges. And the larger the deductions are the faster the IRS challenges are going to come.
You should always consult with a professional Estate Administration Attorney if you are considering taking out a loan from a trust that has any estate tax implications.
*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.