It has been said that it is better to give than to receive although it can also be pretty good to receive as well. Giving is a major component of the estate plans of many people. There are a variety of reasons for making gifts among them the reduction in estate taxes by reducing the giver’s estate. The definition of a gift for estate planning purposes is the transfer of property from one person to another without adequate and full consideration in money or equivalent value. What this means in plain English ( a form of language rarely used and much abused in the tax laws) is that things sometimes not thought of as gifts qualify as gifts for estate planning and estate tax purposes. Examples of such gifts include the sale of a real estate for a dollar, the forgiveness of a debt, assignment of a life insurance policy and forgiveness of loan interest.

The federal government and the states of Connecticut, Louisiana, New York, North Carolina and Tennessee have gift taxes. The gift tax is an excise tax on the right of a person to make a gift to someone else. Therefore the gift tax is paid by the giver. The gift tax is based upon the value of the gift. The rate applied for the federal gift tax is the same as the estate tax.