Under IRC §2503(b), each donor is allowed to make gifts, free of gift or other transfer tax, including generation skipping tax, each calendar year, to one or more persons, in an amount not exceeding $13,000 with respect to each person. This limit applies separately with respect to a husband and wife, and there is no limit on the number of donees. The gift must ordinarily be of a present interest, which means it cannot be a gift in trust or a gift of any other future interest. There is an important exception to this rule in the case of annual withdrawal trusts discussed below.

IRC §2503(e) contains a separate exemption from the transfer tax, including generation skipping tax, for any amounts paid on behalf of an individual as tuition to certain educational organizations or to a person who provides medical care (within the meaning of the statute). This exception has a lot of potential for avoiding transfer tax, particularly in the case of grandchildren.