The annual gift tax exclusion allows an individual to give away up to $14,000
per year (2013 limit) to as many individuals as they choose and not incur
any federal gift tax liability.
Many times when I am talking with people about Florida Medicaid long-term
care planning, they tell me that mom or dad have not made any gifts other
than annual exclusion gifts. Therefore, they feel that the answer to the
Medicaid question of have any gifts been made is “no”. However,
this is not the correct answer.
Although the $14,000 gifts may be excluded for gift tax purposes, that
exclusion does not extend to Medicaid purposes. This is because the IRS
tax rules regarding gifting and the Florida Medicaid rules regarding gifting
are not the same rules. For Florida Medicaid purposes, any transfers for
less than fair market value are subject to review and possible penalties
under the gifting rules. There is not an exception for the IRS $14,000
annual exclusion gifts.
Sometimes, when people realize that mom and dad’s hard earned retirement
nest egg is not going to be large enough to cover the costs of long-term
care they start to feel like they are caught between a rock and a hard
place. Mom and dad don’t have enough money to pay for long-term
care, but they have too much money to qualify for Medicaid. In an effort
to help, they think that they need to start giving mom and dad’s
money and assets away so they can get Medicaid and the $14,000 annual
exclusion sounds like a “safe” way to do that. It isn’t.
In fact gifting is probably one of the worst things that can be done to
try to qualify for Florida Medicaid.
If your mom and dad, like so many moms and dads, find themselves (in most
cases despite their best efforts to save for retirement) unable to pay
for the costs of long-term care, don’t panic and turn to gifting.
Instead seek guidance and counsel as to how the Florida Medicaid long-term
care rules actually work and what other acceptable options exist for getting
them the help that they need.