You may be thinking, “Hey, the estate tax is withering away. … And even if it doesn’t disappear completely, I’m not worth enough to care.”

Well, think again. The estate tax is something lots of middle-class folks have to worry about after all, now that the mounting federal budget deficit jeopardizes plans for the permanent elimination of the tax.

So it’s worth knowing about a nifty way to use intrafamily loans to trim the bill and pass more of your assets to your children or grandchildren — and to do it right away without triggering the equally onerous gift tax.

If this family loan strategy looks good, you may want to move soon, as the benefits will shrink if interest rates begin their expected move upward later this year.

“These are very attractive right now because interest rates are low,” said Catherine Keating, managing director at JPMorgan Private Bank, which serves affluent customers. “We’ve seen a lot of this over the last year.”

In a typical case, a parent would make a loan to a child, who would pay the parent interest at an “applicable federal rate” set by the government. Currently, the rate, fixed for the life of the loan, would be 1.62 percent on a loan of three years or less, 3.44 percent on one of three to nine years, and 4.94 percent on one with a term over nine years. You can’t beat those rates at a bank or mortgage company.

The loan can be set up so the child pays the principal back gradually, as with a mortgage, or in a one-time “balloon” payment at the end of the loan’s term. A loan designed like a mortgage and used to pay for a first or second home, or to improve one, could receive the same federal interest-payment deduction available for ordinary mortgages.

If the arrangement is a bona fide loan, it can involve any amount and not count as a taxable gift. And if the borrower invests the money, the return belongs to the borrower and does not add to the lender’s estate.

Suppose, for example, that a parent lent $100,000 to a child for 10 years and the child invested in the stock market with returns averaging 8 percent a year.

The compounded investment gain would come to nearly $116,000. The child would owe capital gains or income tax as with any ordinary investment, but the gain would not be included in the parent’s taxable estate. If the parent made the same investment, the $116,000 could be subject to estate tax at a rate near 50 percent.

The $100,000 principal would, however, continue to be part of the parent’s estate, either because it is paid back or was a debt receivable at the time the parent died. In this case, loan payments would be made to the lender’s heirs.

The $27,000 in interest received from the child also would be part of the parent’s estate unless, of course, it had been spent or given away.

Why shouldn’t the parent just give the $100,000 to the child, getting it out of the estate for good?

Because a gift larger than $11,000 in a single year (or $22,000 from a couple) can be subject to gift tax, which for some people also can run to nearly 50 percent.

The tax cut bill of 2001 is gradually reducing the estate tax. For someone who dies in 2004, the tax will be owed only on the portions of the estate exceeding $1.5 million (though there’s no tax on assets passed to a spouse). That “exclusion” goes to $2 million in 2006 and $3.5 million in 2009. The tax is to disappear entirely in 2010.

But there’s a catch: Like many of the 2001 tax cuts, this one is automatically repealed in 2011, meaning the tax will return unless Congress acts. With the budget deficit soaring, it’s not a given that Congress will do so, especially if the Democrats return to power.

Under the pre-2001 law, the estate tax exclusion would now be $1 million, so that could well be the figure if the tax cuts are not extended.

Since the estate includes all assets, including a home, investments and proceeds from life insurance policies, many middle-class people who don’t think of themselves as rich could be subject to the tax.

So the family loan is a good tool for reducing that potential expense.

What if you make a loan and find later that you need the money? You could ask the borrower to pay it back earlier, though you couldn’t force an early repayment.

Obviously, it’s a tricky area. Keating says it’s best to have the loan drawn up by an estate or tax lawyer familiar with the process.