Gifts and inheritence taxes?

For estate taxes, no.

For gift taxes, yes. The exemption is per each combination of from and to. A married couple giving to another married couple may give up to FOUR exemption amounts and still avoid the gift tax.

Do you expect your taxable estate (for estate tax purposes) to be high enough that estate taxes may be due? If not, it shouldn't make any difference either way.

If you are looking at estate taxes for your estate, then, as Stussy said, you can give away twice as much to your son and his wife than to your son alone, and get that amount out of your estate for estate tax purposes.

But if you lower your estate through the gift tax exemption (a max of

52k per year right now), you will decrease your estate and thereby lower estate taxes.

However, money you receive through inheritance is yours alone, or at least it is in California (separate income in a community property state). But if you gift 52k, half goes to spouse, half to the son.

daughter-in-law

The exemption is an exemption and does not lower the unified credit.

Amounts OVER the exemption are either paid or do lower the credit.

And with 52k, half is from you and half from your spouse (to meet the exemption).

If you have enough assets to be concerned about estate tax (don't listen to the politicians, find out the rules) you need to spend some money on professional estate planning. It's not a DIY project.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

And also gifts to each grand child.

Don't know how much we are looking to move, but since Peter mentioned grandchild - you can gift $13Kx5 = $65K to each grandchild's 529 savings account, and then no gifts to them for next 4 years. This will get the potential growth out of your name, and put it into their future college fund with tax-free growth.

To Phil's point, above a certain value it's really worth the money to talk to an attorney whose primary business is estate planning. The estate exemption is in flux, set to go back to $1M in 2011 if congress doesn't act. There are too many things that can go wrong which will make a $2000 lawyer bill look good in hindsight. Joe