The most common gifting misconceptions I encounter in my daily practice are:
Those who are completely unaware of any gifting rules:
- Can’t I just give all of my assets away to my children?
- How can the government tell me what I can do with my own money?
Those who are vaguely aware of the tax rules and assume they apply to Medicaid:- If I give any gifts to my children, won't they have to pay a lot of taxes?
- Isn’t it true I can only give away $13,000 per year?
- Isn't it illegal if I give away more than $13,000 per year?
Those who are aware of Medicaid, but misinformed and confused:- If I've made any gifts in the past 5 years, doesn't that mean I can't qualify for Medicaid?
- Once my spouse qualifies for Medicaid, doesn't that mean I can’t ever make any more gifts?
- If I make any gifts to my family, doesn't that mean I won’t ever qualify for Medicaid?
Most potential clients, and many attorneys who don't practice regularly in the field of Medicaid Asset Protection, harbor some or all of these misconceptions. Understanding the realities of gifting in the context of Medicaid Asset Protection is extremely important, because any one of these misconceptions can influence your decision as to whether to practice in this area, and can influence the decision of a potential client as to whether to hire you and engage in Medicaid Asset Protection.
Although it is true that some gifts will disqualify a person from receiving Medicaid for a specific period of time, there are extremely important exceptions and extremely complex Medicaid rules that apply. The misunderstanding that gifting is capped at $13,000 per year is of course a complete fallacy. As most attorneys understand, the annual gift tax exclusion only applies for tax purposes, and has nothing whatsoever to do with Medicaid.
Depending on the donee and the type of property, gifts of any amount may be just fine under your state’s Medicaid rules. For example, the following types of gifts are generally not penalized at all: gifting assets to a spouse; gifting assets to a disabled child or a trust for a disabled child; making regular gifts in certain small amounts; gifting a residence to a caregiver child; gifting a residence to a sibling on title; and numerous other exceptions. There are also many asset protection strategies that involve making intentional gifts that are penalized, but doing so in a controlled fashion under the guidance and supervision of an knowledgeable Elder Law attorney.
There are complex Medicaid considerations underlying all of these gifting strategies, and understanding these considerations, along with all of the complex and myriad Medicaid rules and requirements, is a daunting task for any Elder Law attorney. Evan H. Farr on Google +