The Street: “Individuals looking for a simple and effective way to reduce their future taxable estate should consider the annual gift exclusion.
What is the annual gift exclusion and how does it work?
Every U.S. citizen is allowed to give anyone $13,000 (2012 level) a year without incurring either a gift tax liability or gift tax reporting. Married couples are allowed a further benefit which allows them to split their gifts. In essence, a married couple can give any individual up to $26,000 per year. Married couples who make split gifts do have a reporting requirement. They must file IRS Form 709 on which they report their split gift.
The humble annual gift exclusion can be an effective way to transfer wealth without using any of an individual’s lifetime gift exclusion or estate exemption (both currently $5.12 million in 2012).”