In a bid to qualify for Medicaid Benefits, some seniors may consider gifting large assets, such as their homes, to their children, friends or other family members. While doing this type of Medicaid Planning may seem like a shrewd strategy, such an action can have unintended consequences for both the giver and the recipient.
Families should understand the limitations on gift-giving and possible periods of ineligibility for government benefits such as Medicaid.
Tax liabilities for large gifts
When gifting large assets, United States residents must report property transfers exceeding a specified amount to the Internal Revenue Service. Failure to report gifts may result in hefty fines and even criminal charges. Additionally, gifting large amounts of money or property can trigger federal and state taxes, depending on the location.
Since the government has a clear view of a person’s finances through tax returns, hiding such a transaction is either impossible or illegal. When a person disposes of an asset and does not receive fair market value in return, the government typically imposes a period of ineligibility for benefits. Responsible authorities consider a look-back period of five years for uncompensated transfers.
Harm to a spouse
Gifting a home can have severe repercussions for marriage mates if one dies. For example, if an elderly parent gives away a residential property and dies soon thereafter, the surviving spouse may not have a place to live. The property owner has no obligation to return the home to the spouse and may not even have a legal way of doing so.
Deeding away significant assets can be a risky proposition. Seniors and their families can review available options to make informed decisions that do not cause additional hardships.
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Written by Marie Corliss, an experienced New York Elder Law and Medicaid Planning Attorney and the founder of Corliss Law Group in Cortlandt, New York. Attorney Corliss is a Member of the National ElderCare Matters Alliance, and she and her law firm have a Featured Listing on ElderCareMatters.com – America’s National Directory of Elder Care / Senior Care Resources to help families plan for and deal with the Issues of Aging.
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