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Sorry about making you cross post :)

1) Annual gifts of (currently) $12,000. Each person can give this amount to as many people as they want (as far as I know). Is there some limit to a lifetime total on these gifts? IF MIL gives her daughter and son-in-law $24,000 per year for 15 years is she exceeding a limit?

No. There is a limit on how much you can exceed those amounts (the annual limit increases with inflation, so eventually it'll be $13K, then $14K, etc). There is no limit to how many times you can give that amount.

2) Estate tax exemption. Currently $2 million, going up in 2009, eliminated for 2010 (rich people watch your back year) after which is conjecture. As far as I know, the $12,000 per year given while alive is irrelevant to the $2 million exemption once the person dies.

The $12K per year is, but any amount you exceed it is not.

The estate tax exemption is actually called the 'unified credit'. Unified in this case is referring to estate tax and gift tax combined.

You can use up your unified credit by giving gifts *over* the annual $12K exclusion. So, if you gave someone $20K, then you'd have to use up $8K of your unified credit (or otherwise the giver would need to pay actual cash taxes on the $8K).

3)Uniform tax credit. Like what? It says $345,000 lifetime exemption, provided you file the gift tax form. Does this $345,000 include those $12,000 per year gifts? Does it have anything to do with the $2 million estate exemption? Or is it something completely different?

No, the $345K does not include those gifts. Its again talking bout the amount *over* those gifts.

And, okay, you got me, its a bit more complicated than that (isn't is always). But you're starting to bump up against what I understand. There are two unified credit amounts ('unified'? ha!) and its higher for estate taxes. The $345K you refer is actually said by the IRS to correspond to $1 million in gifts (I guess there's a 34.5% rate in there somewhere?).

So at this point I'm just gonna refer you to IRS publication 950, and, probably then, back to the tax strategies board if you want to know more:

But as it refers to your situation, its probably sufficient to know this:
1) The giver has to file and 'pay' the gift tax if they give more than the annual limit to any one person
2) Giving over that amount doesn't mean the giver actually needs to pay cash, but, if they chose not to, then they need to reduce their lifetime credit which applies to estate taxes as well.
3) If they then have an estate large enough to be taxed, they will pay more estate taxes upon passing becuase they're reduced their credit.
4) All this is entirely to make sure you can't avoid estate taxes by just giving it all away before you die.


But Bobcat says he has a slew of CDs on which he gets paid the interest so if he cahed those in to give gifts, there would be no interest charges.


Yes, that might be a better alternative source of funds if he chose to give gifts.
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