Gifting and Medicaid rules can be confusing, but it’s essential to understand how they work. According to the 2023 gift tax laws, you can gift up to $17,000 a year without it being taxed. However, if you gift more than that, only the amount over $17,000 will be taxed or go against your lifetime exemption. Each state has a lifetime gifting limit, but it’s usually high enough that most people don’t have to worry about it. Medicaid rules are different when it comes to gifts…
Medicaid Gifting Rules
With Medicaid, no matter the value of the gift, if it’s given within 5 years of applying for Medicaid, it will be counted as an impermissible transfer. Small gifts, like birthday or Christmas presents, are typically not penalized. But if you gift more than a small amount, the state may impose a penalty of up to 5 years to prevent people from giving away all their money before relying on Medicaid for care.
There are exceptions to these rules. If you transfer money to a disabled child, it won’t be counted as a penalty by Medicaid. You can also transfer money to a spouse without penalty. In some cases, you can transfer ownership of your home to a sibling or child who has lived with you for a certain amount of time without incurring a penalty.
Another exception is for those who care for a sick parent. If you’ve been living with and caring for a sick parent for at least 2 years, your parent can transfer the home to you without a penalty.
Elder law attorneys understand the ever-changing Medicaid laws and can help you legally and ethically protect your savings if a long-term care need arises.
Most people won’t have to worry about gift or inheritance taxes, but it’s important to understand Medicaid’s gifting policies. To protect yourself, consider speaking with an elder law attorney. They can help you make the best plan for you and your family.
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One of the many benefits of being an elder law attorney is getting to work with selfless clients who act not out of their own self interest, but out of a deep concern for the people they love. That’s why I love helping families enjoy peace of mind and protect their hard-earned assets.
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