The perennial problem with Tax Advisors and Elder Law

I cannot count the number of times over 30 years that I have had to explain to clients who are seeking help with getting a loved one qualified for nursing home Medicaid benefits that just because the IRS says you can give away 10,000 or 11,000 or 14,000, or 16,000 per year DOES NOT MEAN that Health and Human Services will not assess a gifting penalty for doing so.

This problem arises because well meaning, knowledgeable, competent tax advisors, investment advisors and Estate Planning Attorneys properly tell people that the Internal Revenue Code has a provision called the “Per Donee Annual Exclusion” that lets taxpayers give away money or property to anyone in the world without having to file a gift tax return or pay a gift tax so long as the amount of the gifts for any one year is under the per donee annual limit, currently $16,000.  A much smaller subset of the same groups of people may also know about Medicaid eligibility and may just happen to mention the gift penalty issue, but, since the majority of people who practice in the categories above do NOT KNOW about Medicaid laws, it is not the standard of care to warn people against making gifts.

The Gift Tax law resides in Title 26 of the United States Code and it binds taxpayers and the IRS.

The gifting penalty law that provides for the assessment of a penalty for making gifts in anticipation of applying for Medicaid benefits arises under Title 42 of the United States Code and it binds state Health and Human Services personnel and patients applying for Medicaid Benefits for the Elderly.

The two are not the same, period.  If you are a senior citizen you should seek the advice of an Elder Law attorney before making any gifts.  A poorly planned gift can wind up costing multiples if Nursing Home care become a reality within 5 years of the gift.

This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.