Time is running out for making 2002 tax-free gifts

You have only until the end of December to make tax-free gifts for 2002.  Each year you can make gifts up to a certain dollar limit to an unlimited number of people free of any gift tax.  For 2002, the dollar limit per recipient is $11,000.  For example, if you have two children, you could give each of them $11,000 before the end of December.  Your spouse could make similar gifts, allowing you to transfer a total of $44,000 to your children free of gift tax.

Why would you want to make tax-free gifts? There are a number of possible reasons.  Tax-free gifts are often used in estate planning as a way of steadily reducing the value of a taxable estate during the owner's lifetime.  Another strategy is to transfer income-producing assets to children or other family members who are in a lower tax bracket.  The recipients pay taxes on investment earnings or capital gains at their lower rates, resulting in a net tax savings for the family.

Keep in mind that you have only until December 31 to make use of your 2002 exclusion.  To count as a 2002 gift, the transaction must be completed by year-end.  On January 1, 2003, you can begin making 2003 gifts of up to $11,000 per recipient.