Sometimes I just can't help pitying rich folks. Lately it's because the new tax law gives them yet another high-class quandary: Should they rush to give away everything to their kids during the next two years in order to save future estate tax?

That's precisely what some financial pundits are now suggesting they do. Their advice grows out of the estate tax overhaul President Obama signed in December. It raises the tax-free limit on lifetime gifts from $1 million to a hefty $5 million ($10 million for married couples) before a gift tax applies. When it does, the rate is a maximum of 35%.

From an estate planning perspective, lifetime gifts have always had an advantage over passing assets when you die. Such gifts leave less in your estate for the government to tax, and if the assets increase in value after you have passed them along, you will not owe gift tax on the appreciation.

For those who want to implement this strategy, the new law offers more flexibility than ever before. You can apply the $5 million limit during life, when you die or some combination of the two. And any part of it that you don't use yourself can be carried over by a spouse who survives you--a new rule called portability. The one proviso is that the executor of the estate of the first spouse to die must file an estate tax return, even if no tax is due. (For questions and answers on the new $10 million per couple federal estate tax break, click here.) So if you don't get around to making those gifts, your spouse can pick up where you left off.

The unique "opportunity" that's now being pitched stems from the fact that all these super generous terms expire at the end of 2012. If Congress doesn't act before then, not only will portability lapse, but the exemption amount will revert to $1 million and the tax rate will increase to 55%.

While the exemption amount is at $5 million, though, tax pros figure it's possible to give away many, many multiples of that without paying a penny of tax. Billionaires may even be able to knock a few zeros off their personal balance sheets without entrusting their investments to the next Bernard Madoff look-alike.

Instead, they can rely on a variety of strategies developed by some of the most brilliant tax lawyers in the country to shift wealth down generations. During the past two decades they have assembled a powerful toolbox to leverage (or pack more into) the lifetime exemption amount and minimize the gift tax owed.

A long-time favorite has been the grantor retained annuity trust or GRAT, which involves putting appreciating assets into a short-term irrevocable trust (two years is typical) and retaining the right to receive an annual income stream for the term of the trust. This annuity is based on the Section 7520 rate, which is set each month by the IRS. If you survive the trust term--a condition for this tool to work--any appreciation above this set rate can go to family members or to trusts for their benefit when the term ends. If you die during the term, a portion of the trust will be included in your estate.

Under current law, it is possible to set up a GRAT that will result in no taxable gift, or a nominal one, which is sometimes called a Walton GRAT, because of its use by members of the Forbes 400 family that founded Wal-Mart (WMT - news - people). There was talk that Congress might change that, but the new tax law leaves GRATs alone.

Nor did the lawmakers cut back on the use of family limited partnerships, another leveraging tool that the IRS has never liked. They have a lot in common with tricks you might try--like rolling up your clothes to fit within an airline's carryon baggage allowance. First you put property--assume it's publicly traded stock--into a partnership. Next, you give shares in that partnership to family. Since few people outside the family would pay money for such a thing, you're allowed to discount the stock's value by about 30%. Therefore your gift uses up less of the tax-free amount.

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