You can give gifts equaling a certain amount of money each year without eroding your available unified lifetime gift/estate tax exclusion. By doing this you can pass along assets to family members who would be inheriting them someday anyway in a tax-free manner as you steadily reduce the taxable value of your estate.
In 2012 the limit for annual tax-free gifts was $13,000. You could give gifts to any number of people equaling up to $13,000 tax-free.
This year we are fortunate enough to have an increased limit. The annual per person gift tax exemption has been raised to $14,000 for 2013.
If you are married you should recognize the fact that this is an exemption that is afforded to both a husband and wife, enabling tax-free transfers as a couple of up to $28,000 this year to an unlimited number of gift recipients.
When you think of a gift you may logically envision handing someone a check. You can indeed give this type of tax-free gift.
However, there are indirect gifts as well. For example, when you give someone in the family an equity share in a family limited partnership it is considered to be a taxable gift.
This annual $14,000 per person gift tax exemption can be utilized to great advantage if you want to distribute equity shares in a family limited partnership to family members. If you take advantage of it every year, over time you could transfer a very significant amount of money without incurring any tax liability.
It should also be noted that you can pay the tuition of any number of students free of the gift tax, and you can also pay medical expenses as a gift without incurring any gift tax responsibility.