ARE THERE ANY TRANSFERS (GIFT OR INHERITANCE) THAT ARE TAX FREE?
A. Yes, there are certain exclusions from gift tax. Each individual has the right to gift $13,000 (2009 figure) in any calendar year to any number of persons. For example, if you have two children who are married and each one of those children has a spouse and three children, you could gift $13,000 to each of the ten family members per year. In this way, you could gift $130,000 per year with no gift tax consequences and reduce your taxable estate. Often family members who have total assets that exceed the Federal applicable credit amount make these tax free gifts for the purpose of reducing the amount of assets in their estates, thereby reducing their eventual estate tax liability. Other gifts excluded from gift tax are unlimited payments on behalf of another person made directly to a provider of educational services for tuition or to a provider of medical services. An individual can reduce his total assets and eventual tax liability by paying a grandchild’s college tuition, or nursery
