The estate and gift tax is a tax applying to all lifetime and death transfers. There is an exclusion for gifts not exceeding $11,000 each year. The exclusion applies to all gifts to a particular donee in a year. In other words a donor's gifts up to $11,000 to each donee each year are exempt. The exclusion is doubled if a spouse joins. Therefore parents can give $22,000 per year to each child without incurring gift tax or having to file a return.

The amount of the exclusion is indexed for inflation so it may rise in the future.

Payment of tuition or medical expenses direct to a qualified school or medical provider is exempt also, even if over $11,000. (This exclusion also applies to the Generation Skipping Transfer Tax).

Part of estate tax planning can include giving away assets to children during life. Not only the asset, but the appreciation on it, is out of the donor's estate. The gifts can also sometimes be made at discounted values. The annual exclusion is used to shelter these gifts from gift tax. People with very large estates often make additional gifts for which a gift tax return must be filed and use part or all of their unified credit against tax or even pay some gift tax.

Donald M. Thompson * 55 W. Monroe #3950; Chicago, IL 60603
Ph: 312-782-0844 * Fax: 312-201-1436 * Email: donthompsonlaw@sbcglobal.net