Understanding Estate Taxes
Strategies To Reduce Or Eliminate Your Estate Taxes
6. Tax-Free Gifts
This is easy and it doesn't cost anything. Each year, you can give up to $12,000 ($24,000 if married) to as many people as you wish. So if you give $12,000 to each of your two children and five grandchildren, you will reduce your estate by $84,000 (7 x $12,000) a year - $168,000 if your spouse joins you. (This amount is tied to inflation and may increase every few years.)
If you give more than this, the excess will be considered a taxable gift and will be applied to your $1 million gift tax exemption.
Charitable gifts are unlimited. So are gifts for tuition and medical expenses if you give directly to the institution.