Estate planning discussions in 2012 have focused on deca-millionaires and those with even more wealth. Regular people have been left out. Estate planners and financial media are pounding the table for people to give away a lot of money by Dec. 31 because of the scheduled end of the $5.12 million estate and gift tax exemption on Jan. 1, 2013. If the expiration sticks, it means there’s a once-in-a-lifetime opportunity to ensure the current and future value of substantial assets avoids estate and gift taxes forever.

But there aren’t many people in a position to give $5 million or more. In this visit let’s focus on some shrewd gift giving strategies that are valuable whether you’re in a position to give away $5.12 million or an amount with substantially fewer zeros in it. The tax law provides ways everyone can maximize the amount of current and future value that can be transferred tax free to loved ones. Take advantage of those rules.

The annual gift tax exclusion lets you give away $13,000 per recipient free of gift taxes in 2012. (This will rise to $14,000 because of inflation in 2013.) A married couple jointly can give $26,000 tax free annually to each person. You can make these gifts to as many people as you want each year.

To qualify for the annual exclusion, the gift must be of a present and immediate interest. That means contingent gifts or future gifts don’t qualify, but as we’ll see there are ways around that.

The annual gift tax exclusion is unlimited when you help someone with medical and education expenses. To qualify, you must pay the provider of services directly. The medical expenses must meet the definition of deductible medical expenses. Qualified education expenses are tuition, books, fees, and related expenses but not room and board. You can find the detailed qualifications in IRS Publications 950 and the instructions to Form 709.

The annual gift tax exclusion is in addition to the lifetime estate and gift tax exclusion. Your first gifts for the year apply against the annual exclusion. When gifts to a person exceed the annual exclusion, additional gifts to that person for the year apply against your lifetime gift tax exclusion. Only after you’ve exhausted your lifetime exclusion are gifts taxable.

Maximize the value of these rules by giving smart and avoiding frequent gift-giving mistakes.

Give early. Most people wait until the end of the year to make estate planning gifts. They mix their estate planning with the holiday season. You’ll reap more benefits by giving early in the year. Any appreciation for the year is out of your estate and doesn’t count against your exclusion amount. When the property produces income, giving early in the year transfers the income from your tax return to the donee’s.

An alternative to giving early in the year is to give when an asset’s price is down during the year. At the start of the year plan how much you will give for the year, and then make the gifts when market prices are down.

Give an extra amount. Most people give the exempt amount and nothing more each year. If you can afford to live without the assets, however, consider giving more than the annual exempt amount.

If assets are appreciating over time, removing them from the estate now also removes the future appreciation. When an estate is unlikely to exceed the estate tax exempt amount, this is not important. But if an estate is likely to be taxable, the owner should consider removing appreciating assets early. Otherwise, at current tax rates only sixty-five cents of each dollar of additional appreciation in the estate goes to the heirs. For large estates, it can make sense to give amounts exceeding the lifetime exemption now. Pay taxes on the current amount and ensure there are no gift or estate taxes on the appreciation. This is especially important if you expect estate and gift tax rates to increase.

Give property you expect to appreciate. Cash is nice, but to maximize tax-free giving distribute assets you expect to appreciate over the years. That removes the future appreciation from your estate tax free. Giving appreciating assets also might discourage some loved ones from selling them and spending the proceeds. When you give cash, they’re likely to spend it.

Retain property with big gains. The donee of your property takes the same tax basis you had in appreciated property. When she eventually sells the property, she’ll owe capital gains on the appreciation that occurred during your ownership as well as those during her ownership. But when property is inherited, the tax basis is increased to its current fair market value in most cases. The appreciation that occurred during your ownership escapes capital gains taxes under current law.

When you can, keep property that appreciated a lot while you’ve owned it. Give property you expect to appreciate but that doesn’t yet have substantial capital gains.

Keep loss property. When a property’s value declined during your ownership, the beneficiary’s tax basis is the lower of the current value and the your basis, which means it is the current value. No one gets to deduct the loss that occurred during your ownership. It’s better for you to sell the property, deduct the loss on your tax return, and give the cash proceeds. Or find other property to give.

Review Kiddie Tax implications. When gifts are made to minors, keep the latest version of the Kiddie Tax in mind. The Kiddie Tax says that in some cases investment income of children is taxed at the parents’ highest tax rate. You can find details in IRS Publication 17.

You can maximize tax-free gifts even when you want to protect wealth from mistakes, waste, and outside forces. Consider these strategies and tools.

Maximize trust gifts. Gifts don’t have to be made directly to individuals. Gifts to a trust qualify for the annual exemption if the gift is direct and immediate. A gift to a trust qualifies when there is a Crummey clause, which gives the beneficiary the right to withdraw the gift from the trust. A beneficiary must be aware of the right to withdraw the gift. The right to withdraw can expire after a period of time, such as 30 days. If the gift is not withdrawn in the time period, it stays in the trust and is subject to its limits. Of course, if a beneficiary does withdraw a gift from a trust, there is no obligation to make future gifts.

Add contingent beneficiaries. The annual gift tax exemption can be contributed for each beneficiary of a trust. If there are three beneficiaries, $36,000 can be contributed tax free when the trust has a Crummey clause. Contingent beneficiaries also increase the tax free gifts in most trusts. For example, your children can be the main beneficiaries of the trust and the grandchildren contingent beneficiaries. Your estate planner should know how the trust must be written for contingent beneficiaries to increase the annual exempt amount.

529 plans. College savings plans authorized under section 529 of the tax code are one of the best estate planning vehicles Most states now offer multiple 529 plan options, and any person can set up an account for the benefit of someone else and contribute to it. Contributions qualify for the annual gift tax exclusion. In addition, up to five years’ worth of exclusions can be used in one year for a tax free lump sum contribution of up to $65,000 per beneficiary. The money given to the account is out of the donor’s estate unless he dies within five years. Under many state plans the owner has some choice over how the account is invested.

Income and gains in the account compound tax free. Withdrawals are tax free when they are used for qualified education expenses of the beneficiary.

A distinct advantage of the 529 plan is the owner can retrieve assets from the account for any reason. There is no tax penalty if the owner asks for the return of the assets, though the plan sponsor can impose a penalty of up to 10%. The owner also can change the plan beneficiary at any time.

Some states limit the duration of an account to a number of years or to the 25th or 30th birthday of the initial beneficiary. Others have no time limit.

Bill paying assistance. You can give by making direct payments on behalf of the beneficiary. The beneficiary never touches the money, and the gifts pay for what you intend. Some people pay directly for vacations, summer camps, furniture, clothing, cars, and other expenses.

Direct payments qualify for the annual gift tax exclusion. As mentioned earlier, qualified education and medical expense payments made directly to the provider qualify for an unlimited gift tax exclusion.

Home equity match. Suppose loved ones need an expensive item, but the parents are not able or willing to part with a large lump sum or want to stay within the annual gift tax exclusion limit. A strategy, if the children have adequate home equity and credit, is for the children to make the purchase with a home equity loan. The parents then can agree to make all or part of the loan payments either directly or by sending money to the children. This allows the parents to help the children, stay within the gift tax exemption amount, and spread the payments over time in manageable amounts. The children deduct the interest.

Expense matching. Some donors to charities make challenge matches. They offer to match, up to a maximum amount, whatever amount the charity raises from other donors for a specific purpose. Parents can do the same with children. If the children need or want a car, for example, the parents can offer to match whatever amount the children spend. The match does not have to be dollar for dollar. The parents can offer to pay fifty cents for every dollar the children pay or some other ratio.