Gift tax exclusion for 2013

     In 2013 the gift tax exclusion will rise from $13,000 to $14,000.  A person who makes a gift valued up to $14,000 will not have to report the gift in any way, nor does the person receiving the gift need to report it or pay any tax on it.  This exclusion applies to each person to whom one makes a gift.  For example, if a person has 10 grandchildren and wishes to give the maximum exempt gift to each, he or she can give each one $14,000 for a total of $140,000.  (The person who receives the gift does not have to be related to the giver.)
     A gift of more than $14,000 will require the filing of a gift tax return, but in many cases it will not require any tax to be paid with the return.  A lifetime tab is kept on taxable gifts.  If at any point the total exceeds the lifetime gift tax exemption (which, unfortunately, changes from time to time) then a tax will be paid.  If the total never reaches the gift tax exemption amount, it will be subtracted from the person's estate tax exemption when he or she dies.  (Complicated?  Yes!)
     Gifts of $14,000 or less ($13,000 in 2012) are as if they do not exist for the lifetime tab on taxable gifts.
     Such gifts are valuable tools in estate planning for people who expect to have taxable estates upon their deaths.
     Some gifts are unlimited, such as paying for someone's college tuition.  If paid directly to the school, they are not subject to the $14,000 limit.