Wisconsin has no state gift tax, however federal gift tax rules must be observed when gifting property or money. See the following:
Gift Tax Rules:
An individual can give a gift of up to $12,000 in one year (2006) to another individual before any gift tax implications kick in. If you give above $12,000 to any one individual, you must file a gift tax return. The $12,000 is your gift tax exclusion. There is a separate 12,000 exclusion to each person that you make a gift to. Any amount over this is applied to your lifetime limitation of 1 million dollars.
Up to 1 million dollars, there is no gift tax due, because of something called the Unified Credit. After the 1 million dollar lifetime exclusion gets used up, gift tax percentage ranges from 18-46%.
Keep in mind that certain gifts are not subject to gift tax, such as to political organizations, between US resident spouses, and gifts that are made for directly to a school or medical facility or professional for tuition or medical expenses paid on behalf of another.
Also to note, any unified credit used for gift tax purposes will reduce the amount of credit that can be used for estate tax purposes.
I would not make a loan between family members to avoid gift tax, it is too complicated and interest you receive would be taxable. If you are no where near the lifetime 1 million dollar taxable gift amount, you will not pay any gift tax. If you gift more than 12k to one person in one year, you need to file the gift tax form. To avoid this, you may have several options:
1. Gift less than 12k to each individual in more than 1 tax year. for example, gift 10k to each child over 3 years
2. If the child has a spouse, gift 12k to each spouse
3. If you have a spouse, you and your spouse can each gift 12k to each child.