2500 Highland Road, Suite 105

                                 Hermitage, PA 16148

Hartle Elder Law Practice, LLC

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Local: 724-962-3606




By Carolyn E. Hartle, Esquire, Apr 19 2018 01:44PM

Many parents want to pass their wealth to their children. These parents need to consider both the Estate planning and Medicaid planning consequences of making gifts. With respect to estate planning, under the new changes in the tax law, an individual can give up to $15,000.00 per year, per person without filing a gift tax return. As a result, a married couple can combine their gifts and together give $30,000.00 per person, per year without filing a gift tax return. This is known as the annual exclusion. By making gifts in this amount every year, an individual can reduce the size of his taxable estate. When an individual makes a gift of more than $15,000.00 in one year to the same person, then a gift tax return needs to be filed. However, only individuals with a federally taxable Estate need to be concerned with paying gift tax.

Unfortunately, if an individual makes a gift of $15,000.00 and later enters a skilled nursing facility and needs to qualify for Medicaid, this gift will make him/her ineligible for Medicaid for 45 days, which means Medicaid will not pay for the nursing home for 45 days due to this gift. (There is a formula used to calculate the penalty.)

While making gifts to children can be prudent and helpful for purposes of Estate planning, as you can see, it can have adverse consequences with respect to Medicaid planning. Due to this complexity, the individual should be aware of the advantages and disadvantages of making yearly gifts and should consult a local Elder Law attorney experienced in this type of planning.