What is the annual gift allowance without incurring federal gift tax

Note that I am not licensed to practice in your state.

The federal gift tax exclusion for any given year is $12,000 per person. In your question, you did not say what kind of trust the home was placed in and if your mother was also a trustee. So for the purpose of this answer, I will ignore the existence of the trust. When your mom sells the house and comes to live with you, she can start paying you for your services as a caretaker. In that way, the money she gives you is not considered a gift and will not have a limit of $12,000. However, it is not reasonable that your instant sallary as a caretaker is $70,000. So it would probably be best for her to pay you at a reasonable rate and then you can take that money to off-set your mortgage.

If you have siblings or if your mother has other potential heirs, I would be very careful in documenting where the money is going and try to have everything in writing. You do not want to be placed in a situation after your mother's death where your siblings or other beneficiaries come after you for the money because they think you manipulated your mother for your own financial gain.

There are several different issues here. To be safe, you should contact an attorney in your state.

If your mother is mentally competent, once her house sells, she can give a portion of the money to you to pay off your mortgage if that is her wish. The annual allowance is not a limit on gifts, it is a limit on gifts that are not federally taxable. So long as she is mentally competent, she can do whatever she wants with her asssets. Also, it is $12,000 PER PERSON PER YEAR. So, if you are married, she can give you and your wife $12,000 EACH on December 30, and another $12,000 to EACH of you on Jan. 2. That would pass $48,000 tax free.

However, another issue is the SSI and Medicaid rules. These are governmetn programs for people who have no assets. They provide income, nursing homes, medical care, etc. to elderly people who do not have the means to pay their own way. They have very strict rules that do not allow elderly people to give away their assets in order to qualify for Medicaid and/or SSI, with a 5 year look back window, other than for certain exceptions, which vary by state. If there is any chance your mother might eventually need Medicaid or SSI benefits, or to be institutionalized, you risk jeopardizing her eligibility if she gives away her house sale proceeds.

Please speak to a local attorney.

First, the quick answer: The annual gift tax exclusion for 2008 is 12,000. per person. However, in 2009 the amount adjusts to $13,000. If you are married, your mother could give each of you $12,000 for a total of $24,000 before the end of this year. Then, in January she could gift another $26,000. Furthermore, your mother has a $1,000,000.00 million dollar lifetime exemption so she can give you the balance, file a gift tax return, use the little bit of her 1 million dollar exemption needed to cover the difference, and she would owe no tax.

On the more complicated issue of medicaid, your state law might permit her to enter into a care agreement with you.

Hello South Lyon,

I'm an attorney in Southfield MI (6 locations in detroit are), and if you have other siblings, you probably
would want to make sure your Mom has it in writing that she is going to help you pay off your mortgage
and other siblngs.

Also, You want this done b/c there may be an appearance of taking advantage of your mother, and here in MI,
your siblings or other potential benefiicary's of the Trust (and Mom's estate plan) may have a claim when Mom passes on for undue influence.

If you are concerned that MOm may take proceeds of house sale and go to Vegas (and I'm sure you were just being coy with that statement) to spend it, she is entitled to. Unless you file for conservatorship to oversee Mom' assets due to a capacity issue.

If you are taking care of Mom you may or may not be "entitled" to receiving compensation. In MI a family member doesn't always have the right once Mom passes away to become a "caregiver" creditor of her estate due to the relationship you have with Mom.

Now, it's not to say that while she is living you have her set something up and sign a contract (assuming she has the capacity to sign such a document). I would also make sure any siblings or potential siblings are made aware of such contracts in case they plan on suing when Mom passes on.

the 70k would exceed the 12k/yr gift exemption, but every US citizen has a lifetime exemption of 1mm. so I can't imagine your Mom with a house of $70k having an issue with exceeding that amount.
Just my .02,

Joe Dadich, Esq.
Joseph.Dadich@15criticalpoints.com
Creator of 'I.R.A. B.R.A.T tm system to protect your retirement plans/IRA's from being taxed up to 70%
that your tradtional Trusts can't provide'