It would stand to reason that you could give gifts to your loved ones free of taxation, but unfortunately this is true only up to a point. There is a 35% gift tax in place that is unified with the estate tax. The combined estate/gift tax exemption is $5 million, so if you were to give tax-free gifts throughout your life that equaled $5 million your entire estate would be subject to the estate tax. The IRS has this arrangement in place quite intentionally to dissuade people from giving gifts while they’re still alive in an effort to avoid paying the estate tax.

However, there are a handful of gift tax exemptions that can be utilized to assist your loved ones while you’re still alive to see them benefit from the gifts. One of these is the medical gift exemption which allows each individual to pay the health care expenses of an unlimited number of recipients as a gift, and there is no limit to the amount that can be paid. In addition to necessary medical treatment you can also use this exemption to pay for health care insurance, and this can include some forms of long-term care coverage.

So if you’re looking for a way to reduce the value of your estate in an effort to stay within the $5 million exclusion, you may want to consider medical gift giving. Given the high and rising costs of health care and medical insurance these gifts can shave down the taxable value of your estate considerably while you are helping a loved one when he or she needs it the most.