A gift is defined as any transfer of property for which the giver (donor) receives less than the full property value in return. Gifting allows the ability to direct the disposition of property during while alive. A gift is not complete, however, until the donor parts with control over the property.

When assets are gifted, there is peace of mind that the property gifted won't be subject to probate, creditors, disgruntled heirs, and it may avoid being included in the donor's gross estate.

A person (donor) may intentionally gift property to someone (donee) but one may also inadvertently gift property as well. For example, forgiving a debt, changing the title on property, purchasing something for the benefit of another, or paying someone else's expenses or debts, all qualify as gifts.

Some gifts are completely excluded from federal gift tax consideration. They include:

• Contributions to political organizations
• Direct payments of an individual's medical/hospital expenses
• Direct payment of an individual's tuition for education.
  There are still other gifts that are subtracted from the total gifts made in a calendar year. They include:
  
• Annual total gifts of $12,000* or less to any one person
• Annual total gifts of $22,000* or less to any one person when split between spouses (a gift tax return, however, must be filed when splitting any amount of gift with a spouse)
• Gifts between spouses of an unlimited amount, if both spouses are U.S. citizens
• Gifts to charities of an unlimited amount.

*The annual gift tax exemption amount for 2007 is $12,000. This amount is increased periodically based on inflation.