Biff gives a thoroughbred horse worth $30,000 to his niece Brenda, age 16, who loves horses. Biff makes the gift under his state's UTMA, which requires the horse to be legally turned over to Brenda when she becomes 21 -- which is fine with Biff. Biff names Brenda's mother, Josette, as custodian for the gift. They all know that this is only technical, since Brenda will be, and wants to be, responsible for the horse.

The first $12,000 of Biff's gift is free of gift tax. He is assessed gift tax on the remaining $18,000.

Oksana wants to be certain that her grandchildren Victor, 12, and Marya, 10, will have money for college. Oksana wants to make the gift now, so that her grandchildren will know their educational future is secure.

To qualify for the annual gift tax exclusion, the money must be turned over to the kids when they reach 21. Oksana names their father as custodian for a $10,000 gift to each child, and specifies that the custodianships end at age 21.

She transfers some more money to a trust for each grandchild, to last until the grandchild is 30. She names their father as trustee. Oksana realizes that by doing this, she will not obtain the annual gift tax exclusion for any money she gives to the trust, because neither child will receive the money outright by age 21. But her concern about giving a 21-year-old a big bundle of money overrides any consideration of tax savings.

(If Oksana were in good health and her grandchildren were a little older, she might just wait until they enter college, and pay their tuition directly; that's also a tax-free gift.)