For all practical purposes, the Tax Reform Act of 1984 killed the value of interest-free demand notes for such things as college funds for a child, leaving Clifford trusts as the surviving option.

But Clifford trusts are not a totally satisfactory answer. Although these are called "short term," the trust must have a life of at least 10 years and one day to shift tax liability from the grantor to the beneficiary.

And a recent change in the rate used for calculating value (to avoid gift-tax liability) increased the present value to 61.446 percent of the principal amount, versus 44.16 percent under the old tables. The maximum annual gift before incurring gift-tax liability is, thus, $16,274 for a 10-year-and-a-day trust and double that amount with gift-splitting by a married couple.

In the October issue of the Commerce Clearing House's Estate Planning Review, a part of its Financial and Estate Planning Service, another alternative is suggested: the marital remainder trust.

There are, of course, limitations and conditions here, too. In the first place, the technique is available only to a married couple, as the name implies. Second, the spouses must trust each other.

Given those two conditions, the marital remainder trust works like this: One of the spouses -- let's say the husband -- establishes a trust in an amount such as $60,000 for a period of four years. The income is to go to the child during those four years, with the principal to go to the wife when the trust terminates.

There is a relationship between the period of the trust and its dollar amount. Over four years, the the income from $60,000 comes to a little less than $20,000, which keeps the gift to the child within the annual gift-splitting limit. The gift of the remainder to the wife is exempt from gift-tax under the unlimited marital exclusion.

If the income is being accumulated for college funds for the child, and the child isn't yet ready for college at the end of the trust, the wife can then establish an identical trust in favor of the husband, for the same or a shorter period of time.

However, when the first trust is initiated there cannot be any agreement between the spouses for the establishment of a second, or future, trust. Any such pre-arrangement would clearly identify the trusts as a tax-avoidance scheme and, thus, would eliminate any tax-shifting. You can see why complete trust is essential.

The number of dollars and the time period involved can be juggled. If a smaller amount is involved, the trust can run for a longer period. Conversely, a larger sum would require a shorter period in order to keep the value of the gift to the child within the $20,000 gift-tax exclusion.

The marital remainder trust offers the same tax-shifting advantage as the now-defunct no-interest demand note, and ties up the principal for a shorter period than the Clifford trust. If you meet the two conditions necessary to establish such a trust, you might consult your attorney or financial counselor.

Q: I understand that I can make a gift of $20,000 to our son in any calendar year, free of gift tax, even though the entire gift comes from my funds, if we file a gift-tax return on which my husband gives his consent. My question: Do we need to file a gift-tax return if I give our son $10,000 from my own funds and my husband gives him $10,000 from his own funds?

A: In this situation, no gift-tax return is required. You must file a return if either husband or wife makes a gift (to a third party) of more than $10,000 but not more than $20,000 in any one year.

If the total value of gifts to any recipient during the year exceeds $20,000, regardless of the identity of the donor, then both spouses must file returns, regardless of who provided the funds (unless you want to give up one of the $10,000 annual exclusions).