How Gifting May Impact Your Long-Term Care Options

How Gifting May Impact Your Long-Term Care Options

  • December 2, 2021

During the holiday season, many consider giving gifts to their children or loved ones. But some gifts may have implications both for taxes and Long-Term Care planning options. Justin Randall from Hooper Law Office joined Local 5 Live to discuss what you need to know about gifting.

Millaine Wells: Welcome back. The holidays, of course, are a time of gift giving. So how does all of that fit into estate planning?

Lisa Malak: Well, we are finding out today with Attorney, Justin Randall from Hooper law office. Good morning to you.

Justin Randall:  Good morning. 

Lisa Malak: All right, Justin. So how does estate planning fit into our giving spirit of the holiday season?

Justin Randall: Yeah, so this is the time of year that we get a lot of questions about, from parents talking about, you know, I don't have a gift I want to give, but I have some money I want to give to my kids. I have more than enough assets for myself, I don't think I'll ever need this money. So, I want to give it to them while I'm living so that I can see them enjoy it. So that's a really common question we get, but there's some things that people need to be aware of before they make those gifts, depending on their situation.

Millaine Wells: So if we are going to gift cash, say to grandkids, what do we need to know?

Justin Randall: So there's a couple sort of key considerations with gifting. One is something a lot of people are familiar with, or at least kind of heard about. And that's, there's a limit in how much you can gift per person to everybody you know, without having to file a gift tax return, and so that that limit is $15,000 per person this year, that's actually going up to about $16,000 per person next year. So that means that a grandparent could give $15,000 to all of their grandkids, each one of them and not have to file a gift tax return. If they go over that amount, that just means they have to file a gift tax return, which isn't doesn't actually mean somebody has to pay taxes on that necessarily, it just means that you end up lowering your estate tax and the life exemption by the amount we went over. So most people don't have to worry about paying taxes on that unless they're worried about gifting more than $11.7 million in their lifetime.

Lisa Malak: But you say really gifting like this really isn't the best option for long term planning, right?

Justin Randall: Correct. Yeah. And so this is another really common question we get is, when someone comes in about nursing home expenses, or is concerned about protecting things, they'll often ask, well, I thought there was this amount that you could give, Isn't that the case? Doesn't that apply to Medicaid as well. And unfortunately, those gift tax exclusions are what the IRS says you can gift without having to file that gift tax return that does not apply to Medicaid rules. So, if you're gifting with the anticipation of needing long term care, and you think that you're not causing a problem, just by staying within those exemption amounts, you have to be very, very careful because Medicaid says you can't give anything away at all. So technically, their limit is $0. So it's probably one of the most common issues that we see where somebody did this thinking that they were protecting things, but in actuality, they were creating a divestment just like they would if they had gifted you know $100,000. So it's just something to be very careful of if care might be needed in the next couple of years.


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