This memorandum is an
introduction of how to make substantial gifts, through the use of the annual donee exclusion, without incurring any federal gift tax liability or using any of your unified credit available for gift and estate tax purposes.
Each person is entitled each year to give gifts of $11,000 to an unlimited number of donees without incurring any gift tax. For example, you can annually give $11,000 to each of your three children, their respective spouses, and your six grandchildren. Thus, you could make 12 annual donee exclusion gifts (or a total of $132,000) each year without utilizing any of your unified credit amount.
Your spouse can agree to "gift-split" and, under such circumstances, the amount of these gifts can be doubled. Since this can be done every year in the family situation noted above, you and your wife can annually transfer $264,000 without incurring a gift tax liability. After several years, this could result in the transfer of substantial value without any gift tax.
You should note that the annual donee exclusion is only available if the gift is of a "present interest" rather than a "future interest." This often necessitates certain special planning considerations for gifts to minors, but these obstacles can be avoided through the use of trusts, if you are so inclined.
Please contact us if you need further information concerning your gift tax planning.