bpgui: Thanks for the corrections on my posting. You are correct that the five-year aggregation of gift giving applies only to education (or healthcare, I believe). My experience with these types of gifts was solely in the 529 area.
Because we all pretty much agree that trying to hide the $70K within the "look back period" will probably result in a clawback of the money, no matter how it's 'given away', it's highly doubtful the OP's strategy will be successful.
There is, however, a consideration for others regarding the $1M vs $5+M total gift exclusion that should be pointed out, which I discovered when I did a little more research.
By way of background, under Bush's Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the federal estate tax was reduced every year and completely eliminated in 2010 for that year only. The gift tax, however, remained in effect at a 35 percent rate.
On Jan. 1, 2011, the estate tax returned. According to a law enacted in December 2010, estates valued at $5 million or less at death in 2011 are exempt from the tax. Estates worth more than $5 million are taxed at a 35 percent rate.
HOWEVER, because Congress is currently stalemated, no progress has been made as to whether to extend Bush's tax cuts or not. If nothing is done and the tax cuts expire as planned on January 1, 2013, it upends the estate planning of many wealthy families (I've included the Bankrate.com explanation on the Unified Credit below, just for informational purposes); the limit drops back down to $1M.
This is in itself an excellent example of why it can be difficult to do estate planning these days. We can guess at what Congress might do, but none of us know for sure. And we have no way of knowing whether they will make their changes retroactive or not.
From: [url]Estate Tax And Gift Tax Amounts | Bankrate.com http://www.bankrate.com/finance/taxes/estate-tax-and-gift-tax-amounts.aspx#ixzz1yGuzSWgZ[/url]
In estate planning, you also must consider the unified credit. It gets its name because the federal gift tax and estate tax are integrated into one unified tax system.
This is the credit for the portion of estate tax due on taxable estates. For example, if you exceed the annual gift tax exclusion amount in any year, you can either pay the tax on the excess or take advantage of the unified credit to avoid paying the tax. The unified credit enables you to give away $5 million during your lifetime without having to pay gift tax.
By using the unified credit during your life, you'll reduce the amount available to offset the estate tax upon your death. If, however, you pay the gift tax, such taxed gifts are added back to your estate, and the estate tax is recalculated, with the gift taxes you previously paid credited against any final estate tax due.
The current estate tax and unified credit are scheduled to revert to $1 million in 2013 unless Congress extends or makes other changes to the law.