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7. Tax-Free Gifts

Federal law lets you give up to $13,000 ($26,000 if married) to as many people as you wish each year. So if you give $13,000 to each of your two children and five grandchildren, you will reduce your estate by $91,000 a year (7 x $13,000), $182,000 if your spouse joins you. (This amount is tied to inflation and may increase every few years.) State laws may differ.

If you give more than this, the excess will be considered a taxable gift and will be applied to your $5 million ($10 million if married) “unified” gift and estate tax exemption. (If you use it while you are living, it’s considered a gift tax exemption; if you use it after you die, it’s an estate tax exemption.) Charitable gifts are still unlimited. So are gifts for tuition and medical expenses if you give directly to the institution.

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