8. What do I need to know about gifting?

We all make gifts to family and friends for birthdays, holidays, and other special events.  But what about “planned gifting”?  This type of gifting can be very beneficial to you and your family, often for tax planning reasons, or in planning for future long-term care needs.  Gift tax laws are significantly different than gifting rules for Medicaid eligibility purposes, and should not be confused.

If you make gifts over the “annual gift tax exclusion” amount you are required to report such gifts on a federal gift tax return, and possibly pay gift tax. With the current structure of the federal estate and gift tax laws, most gifts, even if over the annual gift tax exclusion amount, will not result in the payment of gift tax.

Currently, an individual may gift up to $15,000 per person, per calendar year, without having to file a gift tax return. $15,000 is the exclusion amount for 2018, and is subject to change in future years.  In addition, certain payments to medical or educational institutions may be excluded from gift tax.

Under Medicaid rules, there is no annual exclusion amount.  This means that you may make a gift that is not subject to gift tax, but will still result in an ineligibility, or a penalty period, during which Medicaid will not be available.

Any gifting, other than nominal gifts for birthdays, holidays, or other special occasions, should be done only after careful consideration, planning, and consultation with tax and legal professionals who have a full understanding of your personal situation and the tax and Medicaid laws related to such gifting.