Estate Exclusion

A person has a large estate and wants to reduce the estate before thier death. They give a gift of $50,000 to one person. Correct me if I am wrong but the gift giver can can elect one of two options. He can not pay any taxs on the gift and let it reduce his estate exclusion by the 40,000 over the 10,000 free, or he can pay the taxs on the 40,000 over.

The question is if he elects to pay the taxs on the 40,000 gift what happens to the 625,000 estate exclucion at the time of his death. Does the exclusion remain the same because the taxs have already been paid or is it reduced in some way by the 40,000.

And last question Is this a good way to reduce the amount of estate taxs paid over the long run.

I don't think you have a choice and you must use the exclusion up first (it would be foolish not to anyway).

However, the FreeAdvice.com Estate Planning and Will and Trusts and Probate sites have all sorts of trchniques listed to reduce taxes, including Family Limited Partnerships, Charitable remainder trusts, lead trusts, gifts, etc.. Go to AttorneyPages.com and find a good Estate Planning lawyer. They really earn their keep.