What is the purpose of the federal gift tax system when adjusted gifts are added back to the estate tax?

Answer 1

The gift tax rates are lower than estate tax rates. Tax planning involves deciding what was best to give away while living (straight cash) and what would be better to have your heirs inherit (appreciated property.)

Answer 2

As with any tax, the purpose is to generate revenue for the state. It's likely that the link between Gift Taxes and Estate Taxes was created to prevent someone from gifting away their estate to avoid estate taxes. However, as long as it's done in $12,000 annual chunks per recipient it's still possible to do so.