We are very far afield from the original topic and this is a very technical tax and estate planning issue. In simplest terms gift tax is an element of estate taxation which allows people to reduce their taxable estate by gifting, up to specified annual limits. For example, your parents or grandparents might give you money each year as a token of affection but also to remove it from their taxable estate. If the annual gift limit is exceeded the gift may be "taxed" only in a technical sense because it reduces the amount of their estate tax exemption. At time of death if tax is due it is paid by the estate, not by the heirs. As a practical matter the effect is often the same because the amount available to distribute to heirs is reduced by the amount of the tax.