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The receiver of a gift pays no taxes. If you remain within the annual limit then you do not pay 'gift tax'. Depending on how the funds are transferred you may need to file a gift tax return to report the transfer.

Depending on your state, even if you do not pay estate tax there could be probate fees. You are talking about transferring over $100,000. Depending on her current assets, it could trigger probate. Any remaining debts that she incurred would be paid during probate.

Having the assets in her name could prevent her from accessing 'low income' programs. If she needs long term care, the funds would have to be spent before she would be eligible for Medicare.

Her income tax rate is probably lower but gifting the principle may not be the best way to transfer the money to her. Depending on whether it would cause you any AMT issues, you could buy tax-free bonds in your name and give the income to her.

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