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How much can an elderly person give as gifts to children.

Buffalo, NY |

Can a person who is elderly and maybe someday enter a nursing home give gifts of money to her children and grandchildren. Is there a time limit before medicare would let this happen if elderly patient were to enter nursing home?

Attorney Answers 3

Posted

An elderly person can give all of their assets to their children. Having said that, as with most things in life, giving gifts may have consequences.

If someone has a taxable estate (and most people don't after the recent tax changes), then any gift in excess of $13,000 may impact the elder's tax situation. A tax attorney can help you figure this out. If someone does not have a taxable estate (currently less than $5 million), then the "$13,000 per year rule" really has no tax impact; the only rule is that you should file an informational return but no gift tax would be owed.

Gifts of capital assets (e.g., land, stocks) may impact capital gains tax liability when an asset is sold. You should speak with an attorney about them before finalizing them.

If you are trying to get nursing home bills paid, then we are looking at the MEDICAID rules, not Medicare. Medicaid has finnancial eligibility criteria; on the other hand, everyone who paid into the system including rich people get Medicare.

There is no safe harbor if you are trying to make gifts to become poor enough to qualify for Medicaid. Every gift within the lookback period (the 60 month period immediately prior to applying for Medicaid) is subject to scruitiny. When gifts are made, generally a penalty will be imposed. The penalty is roughly equal to the number of months of nursing home care which could have been purchased if the gift had been used to private pay for care. The penalty is really Medicaid's refusal to help pay the bills for that period of time. So, if an elder gives away an asset that would have paid for 20 months of nursing home care, and if the elder applies for Medicaid within the lookback period, then Medicaid will refuse to help pay the nursing home bill for about 20 months.

Gifts can impact other benefits programs as well and the rules (at least the way they are applied) will be different in each state. You need to contact someone in your state who knows about these issues. It would be best if it is someone with significant experience practicing elder law.

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Posted

The IRS rules for gifting allow everyone to give away $13,000 to any number of people annually and currently, there is a 5 million dollar lifetime gift tax exemption. The IRS rules are not binding on Medicaid, however. If a senior gives aways assets within 5 years of applying for Medicaid, then a penalty (a period of Medicaid ineligibility) may apply to that gift. There are exceptions to the asset transfer penalty rule that may apply. Medicare does not impose any gifting penalties, and as is common, it appears that you may have confused Medicare with Medicaid. You should get specific advice regarding your situations from a certified elder law attorney in your area. You can find a list of such attorneys at www.nelf.org.

I hope this information is of assistance to you. Best regards, Pete Sisson, CELA

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You can give gifts to your children. If the gifts exceed $13,000, a gift tax return must be filed(although it is unlikely any gift tax will be due unless the parent has a multi-million dollar estate). However, if the gifts, whether over $13,000 or not, are given within five years of applying for Medicaid (This is the program which pays for folks with limited resources to stay in a nursing home-not Medicare), Medicaid will assess a penalty period(equal to approximately the number of months of nursing home care which could otherwise be paid for by the money given away) during which the program will not pay for care. Monetary gifts or transfers or real property by older parents should be done carefully to conform with your state's Medicaid or Special Assistance requirements, and should preferable be done with the advice of an experienced Elder law attorney.

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