The IRS has announced that the annual gift tax exclusion will increase from $12,000 to $13,000 effective January 1, 2009. The gift tax exclusion is the amount the IRS allows a taxpayer to gift to another individual without reporting the gift or incurring any gift tax liability. The number of different individuals to whom gifts may be given is unlimited.
Lifetime gifting can be an effective tool for estate planning purposes. Individuals may elect to make gifts of the annual exclusion amount to one or more individuals per year as a way of reducing the value of their total taxable estate. For example, a married couple with three children could give away up to $78,000 to their children each year ($13,000 per child is 6x$13,000=$78,000), thereby substantially reducing their potential estate tax liability over a period of years.
Lifetime gifting should be considered in concert with other estate planning techniques in establishing the most advantageous plan for you and your heirs and beneficiaries.
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