Furthermore, grandparents and others can now make education prepayments and not owe any gift tax if the gift falls under the $10,000 annual exclusion.

Under a special tax-law provision, a donor can give up to $60,000 to such an account at once and use up five years' worth of $12,000 annual exclusions.

Second, there is a lifetime credit on total gifts until a combined total of $5,250,000 (not covered by annual exclusions) has been given.

Except for an annual exclusion, you owe Federal gift tax on the fair market value of any asset that you give as a gift.

More than $1 million (by a combination of the $600,000 credit, $10,000 annual exclusions and the discount factor) often can be transferred the first year without attracting any Federal tax.

"It is an amazing opportunity to front-load your annual exclusion - $110,000 for a couple," per child, she said.

Mr. Gale estimated that a $1,000 annual exclusion for dividend income would cost the Treasury $4 billion in 2003.

"But as each Dec. 31 passes, you lose the annual exclusion for that year."

Gifts that are not more than the annual exclusion for the calendar year ($14,000 per recipient for 2013)

First, gifts of up to the annual exclusion ($13,000 per recipient in 2009-2012) incur no tax or filing requirement.