Annual exclusion is the amount of money an individual can give another person in one year without paying the Federal gift tax. The amount varies each year and is determined by the Internal Revenue Service. The annual exclusion can be helpful in estate planning by helping those people with large estates give gifts of their money while alive and avoid paying gift taxes and estate taxes after they pass on. This helps not only reduce taxes paid on income while alive it also helps the beneficiary avoid paying taxes on the gifts. The gifts can be given to more than one individual with limits being placed on lifetime amounts as well as individual yearly amounts that can be gifted. Family accountants who specialize in estate planning can provide more detailed information and laws for the state of residence that might apply.