Basic Estate Planning: The Annual Gift Tax Exclusion

Perhaps the most flexible estate planning tool is the annual gift tax exclusion. The annual exclusion, when properly used as part of a larger estate planning program, can significantly increase the size of the donor's estate that ultimately reaches the beneficiaries. When combined with the annual exclusion available to a spouse, also known as gift-splitting, the amount that can be gifted is doubled. In addition, when used for gifts to grandchildren or similar descendants, generation-skipping transfer taxes can also be avoided. This Article provides the general practitioner an overview of planning opportunities available with the annual exclusion.