I understand the tax code may have major changes next year, especially where inheritance and gift taxes are concerned.  How do you decide how much you can gift while alive to lower estate taxes? — Elinor A.

If Congress doesn't extend the tax law provisions set to expire at the end of 2012, there will indeed be changes to the gift and estate tax rates and exclusion amounts, says Gil Charney, principal tax researcher at the Tax institute of H&R Block. In 2012, the gift and estate tax exemption is $5,120,000, meaning you can have a taxable estate plus make lifetime gifts up to this amount without paying any taxes. But that historically high exemption amount is scheduled to drop to $1 million in 2013.

No one can predict what Congress will do, but Charney advises that people with very large estates who are planning on making gifts may want to take advantage of the high exemption in 2012. For example, suppose someone with an estate of $5,120,000 or more makes a $2 million gift this year. The gift tax would be zero because the gift is less than the exemption amount. The gift would reduce the amount of the taxpayer's estate, which would be free from estate tax at death. However, if you made that same gift in 2013, approximately $1 million would be subject to gift tax under the new laws. Taxes would add up to almost $430,000.

There is one caveat to this. It is not yet clear if the change in the law would require a so-called clawback provision that would require a payment of a gift tax or a future tax to be paid by the taxpayer's estate on pre-2013 gifts exceeding the $1 million limit.

Also important to keep in mind: Any individual can gift $13,000 per year to as many people as he or she wants without gift or estate tax consequences. Married couples can gift $26,000 per year to as many people as they like.

— Walecia Konrad

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