The IRS has provided an early Christmas present by announcing that the 2009 annual exclusion gift is $13,000. It increases from $12,000, which was the amount in 2008. The annual exclusion gift is the amount that you can give to any recipient of your choice during the calendar year without tax consequence. If the gift is a present interest and qualifies for the annual exclusion, it does not erode the exemption amount available upon death. As has been widely reported, the exemption amount in 2009 increases from $2 million to $3.5 million.
For example, in 2009, if husband and wife have two children, in 2009 they can give $26,000 to each child. Upon their deaths, if they have done the appropriate planning, they could still leave $7 million to their children without any federal estate tax. (State estate tax may differ.) There generally is no reporting regarding the annual exclusion. However, there are exceptions depending on the type of gift and who is making the gift.