In this section: The first solution to estate taxes. The annual gift exclusion. What you should give away. The first solution to estate taxes. Give it to your heirs instead of Uncle Sam. A simple method to reduce or eliminate estate taxes is start an annual gifting program. Almost all of my clients have heard that you can give away $10,000.00 a year "tax free." This is true, but many do not realize that you can actually give away a whole lot more. If you are married you and your spouse can each give $10,000.00 totally $20,000 per recipient. You can have as many recipients as you like, although for obvious reasons most clients like to keep the money in the family. An example of gifting would be: You are married, have two married children and three grand children. You and your spouse can give $20,000 to each child and each child's spouse and each grandchild equaling a grand total estate size reduction of $140,000. The Annual gift exclusion. This gifting strategy takes advantage of the $10,000 annual gift exclusion. Exclusion from what you say? Remember each individual can give away, either at death or during life a total amount equal to $600,000.00. (The Unified Credit) Starting in 1998 this credit amount will increase over the next 10 years. See the section on estate tax changes for more info. What you should give away. If you think that you are going to owe estate taxes you may want to begin an annual gifting program now. Three things to consider when choosing what to give away: Give away rapidly appreciating assets. No need keeping an asset in your estate that is just going to make the problem bigger as it appreciates. Think before giving highly appreciated assets. Your family gets a great gift from the IRS if you die owning a highly appreciated asset. Basically if they get the asset after you die they do not pay capital gains tax upon its sale, but they would have to pay if you gave it to them while you were alive and then they sold it. Consider whether to gift assets in loss positions. The person receiving the assets cannot benefit from the loss in value. In other words you would be losing the opportunity to offset some of your other gains if you gave the asset away. The recipient can not offset their gains by the sale of the "loss" asset, only the original owner. When considering whether or not to use a gift strategy you should think about the fact that you lose control of the gifted assets.

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