Gift tax is $13,000 cash per year per person. if married, you and a spouse can each give away $13,000 cash to any one person per year.
if I'm not mistaken, if you were to pay for a niece's or nephew's education, directly to the school, it doesn't count. Say the tuition and room and board total over $30,000, you can pay this directly to the school's bursars office and still give $13,000 (or $26,000 from you and your spouse) to the niece or nephew.
The other "catch" is say you give away $13,000 in the form of a check and you give away cash (under the table) about $25,000. If more than $10,000 is deposited at a financial institution, Federal law requires that the bank complete paperwork. This is part of anti-money laundering. You also need to be careful in depositing money that would add up to $10,000 over a short period of time. For example, you deposit $9500 in week 1 and in week 2 you deposit $3500, it could trigger paperwork.
Another wrinkle is you want to buy your responsible 25 year old nephew a new car, you make a deposit of more than $10,000, this too will trigger paperwork.
I don't have any problems with triggering paperwork with the Feds, I have nothing to hide....I win the lottery, it's going to be on my W2G on my 1040 for that year.....my concern is having someone at the bank know that I'm filling the paperwork and I become a " known" customer, kind of like that elderly man in Ca that won the lottery in March where they interviewed the bank tellers and it seemed like he frequents that bank (I don't know how they would know who he was otherwise . I mean I don't walk into a bank where I don't have accounts and start chatting with the tellers just because I'm a friendly person)
Didn't mean to veer off topic, but there are alot of quirks that I have thought of in relation to winning.....$10,000 or more in deposits trigger mandatory paperwork at the financial institution, more than $13,000 (or more than $26,000 per married couple) exceeds the gift tax exclusion amount.
I am not fond of the gift tax, i think it penalizes giving to family that may be in need....
In addition to blindly giving money away, because it makes a person feel good, I think improper planning can create additional hassles and costs not thought of.....That's why I want to consult a tax/estate attorney AND an account so I can minimize the taxes and costs incurred in giving money away now and in the future so I dont go broke.