The gift tax is imposed each calendar year on the transfer of property by gift made during that calendar year. There are exclusions from gift tax in the amount equal to $12k per person per calendar year. The marital deduction excludes an unlimited amount to your spouse. Any outright gift or transfer to a spouse qualifies for the marital deduction. The property will be included in the spouse’s taxable estate and will be subject to tax when the spouse dies. Gifts made to qualified charities are also deductible. Payments of tuition and medical expenses are excluded as long as they are paid directly to the institution.

There is also the unified credit against gift tax, which is $1 million (this credit takes into account all calendar years that gifts have been made).The gift tax rate is 45%.

The estate tax is imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the U.S. The unified credit against estate tax is currently $2 million. The estate tax rate is 45%.

The generation-skipping transfer tax is a tax which is imposed on transfers to individuals 2 or more generation below the transferor. This tax is in addition to the estate tax and the gift tax. The GST tax is a flat tax at the highest estate tax level (currently 45%). This tax was designed to prevent wealthy individuals from avoiding the imposition of the estate tax at each generational level by the use of trusts.

Right now there are many unknown factors in estate planning. The estate tax will be gradually phased out by 2010, a sunset provision in the law calls for everything to revert back to prior law on Jan 1, 2011 unless Congress acts to extend the estate tax repeal.
What will happen to the estate tax after 2010 is unclear, but many tax experts expect Congress to reinstate it in some form.