When you are a senior the type of gifts you give can be about minimizing the taxes you pay or about the protection of assets. But there can be consequences for such actions for the senior and for the receiver and that is why a medicaid lawyer in Ocean Countyis so important. You can consult with them and help avoid or minimize any negative impact gifts can cause.

The IRS has different rules than Medicaid

With the IRS the tax you pay on gifts becomes quite significant when the gifts are larger. But there is a lifetime gift exemption and that is around $12 million. If you are a senior couple that means you can gift up to $24 million. For the majority of people, this is not an issue. For those that do have those kinds of assets and are making such large gifts there are lawyers, tax planning experts and estate planning options to help protect them. After 2025 that exemption is meant to reduce to $5.49 million. There is also a yearly exemption of $16,000 per person so you can gift up to that amount without affecting the lifetime exemption. Those are the current laws in place for the IRS though, and while many people assume that Medicaid has similar requirements that is not the case. When you talk to a medicaid lawyer in Toms River or close to you, they can tell you that Medicaid’s rules are completely different.

Medicaid rules concerning senior gifting

Unlike with the IRS, there is no annual gift exclusion with Medicaid. In fact, any gift made any time 5 years before an application for Medicaid, unless they have applied for and gotten a special exemption will mean an application is penalized. This includes gifts of money to individuals, property, selling a property even if sold for less than the current market price, moving assets into a trust or giving them partial interests. Medicaid is not the only organization that penalizes gifts. The VA does too, ones made within 36 months of someone applying for a VA program or help.

Gifting to someone can lead to real consequences in terms of capital gains tax. It is different from when a property is inherited. Another thing to talk about with a medicaid lawyer in Ocean County.When gifting assets of a high value there can be a large tax bill or a lot of tax savings. For example, if you gift land you paid $40,000 for 30 years ago and now it is valued at $500,000 that is an appreciation of $460,000. The recipient of this gift if the owner is alive has to pay a $40,000 tax basis. When they sell it there is a capital gains tax that is based on that $40,000. On the other hand, if the property is placed in a will and the person gets it as an inheritance taxes are next to nothing compared to that. There are more complicated details when it comes to asset protection and Medicaid that a medicaid lawyer in Toms Rivercan help with.

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