The gift tax exclusion is the annual amount a donor may give to any number of recipients free of gift tax and without using lifetime exemption. To qualify, the gift must be a present interest-immediate use, possession, or enjoyment-so trust contributions typically require Crummey Withdrawal powers. The exclusion applies per donor per donee and covers cash or property; direct tuition or medical payments to providers are separately excluded. The annual exclusion is indexed for inflation under current law. Amounts above the exclusion are still reportable but first use the donor's lifetime unified credit before creating current gift tax. The exclusion enables systematic wealth shifts while preserving flexibility and administrative simplicity.

In practice, families use the annual exclusion to fund ILIT premiums via Crummey notices, seed 529 plans, or shift interests in family partnerships. Advisors map gifts across multiple donees each year, preserving lifetime exemption for larger transfers. They verify present-interest requirements and maintain records to support exclusion claims.