Spouse: Gifts to spouses are not subject to gift tax unless the spouse is foreign, in which case the 2010 annual exclusion amount is $134,000.
Children: If children are minors, all payments are considered part of parents legal obligation to support the children and are therefore not subject to gift tax. If children are 18 or older, payments are considered taxable gifts. Parents can pool their annual gift tax exclusion amount for a combined $26,000 per person per year.
Grandchildren: Historically, a generation skipping transfer tax has applied to gifts to grandchildren (or any person 37.5 years younger than the grantor.) Like the estate tax, the generation skipping transfer tax did not apply in 2010.
Gifts to help cover education and medical expenses are not subject to gift tax and are therefore a good estate planning strategy amongst family members.