Some Good News to Cheer About

As the new year unfolds, we find that despite the challenges that many people are facing that there are always things to cheer about and to be thankful for. Once such "good news" item that happened in 2014 is the increase in estate tax exemptions to $5.3+ million. This increase means that most people no longer need to worry about the possibility of incurring an estate tax when they pass away. Instead, we can simplify our trusts and focus more on minimizing income taxes for our beneficiaries. If you have any concerns regarding the estate tax exemption, please feel free to contact our office.

Gifting Considerations

Gifting can have serious consequences, in the event a person needs nursing home care and doesn't have enough funds to pay for his/her care for 5 years.

As we discussed in a previous post, there is a five (5) year disqualification period for Medicaid purposes for any improper transfer or gift. The question is what constitutes an improper transfer?

• Giving away assets for less than FMV unless such transfer is exempt under the rules; paying for your grandchild's education, your daughter's new car, and/or giving each of your children $14,000.00 for Christmas every year are all improper transfers
   
• Adding a child or another third party as a partial owner/owner of your property
   
• Selling assets for less than FMV; i.e., my car was worth $10,000.00, but I gave it to my grandson for $2,000.00
   
• Purchasing an annuity that doesn't comply with the Medicaid rules
   
• Paying a family member for services without a written contract
   
• Disclaiming assets from an inheritance

Unfortunately, the Medicaid system's holiday spirit can be more like Ebenezer Scrooge's. This being the case, if you are contemplating any "improper transfers" and there is any possibility that you or your spouse could need nursing home assistance down the road, it is important to contact your elder law attorney prior to doing so.

Gifting Misconceptions

Many people are under the impression that individuals are allowed to make annual gifts of $14,000.00 (current annual gift tax exemption) to their children every year without any consequences.

However, this tidbit of "common knowledge" is false!

Although there are no consequences to making a $14,000.00 gift from a federal gift tax perspective, there is an entirely different set of rules from a Medicaid perspective which can create adverse consequences. Making gifts to your children every year could have a significant impact on the your and/or your spouse's eligibility for Medicaid. Under the Medicaid rules, there is a five (5) year disqualification period for all gifts made and there are no minimum gift amounts.    This being the case, if you are contemplating giving a gift to a child or to another third party, it is important to consult not only with your accountant, but also with an elder law attorney so that you have an understanding of the impact of that gift on Medicaid eligibility.