Present Giving, Medicaid, and the Estate Tax
A lot is said about the complexities of estate planning, but in the end it is a relatively easy matter.
The point is to direct assets that as soon as belonged to you into the belongings of your heirs as quickly and merely as possible. When this is done after you pass away the last will or some form of trust is frequently used to accomplish this, however the truth is you can select to move assets to others while you are still alive. This could be done through making gifts. Of course we’re all mindful of the instant sensation of complete satisfaction that a person experiences through the happiness of providing. This in itself makes present giving something that you might desire to think about. Besides the complete satisfaction and joy there are useful advantages to this course of action as well.
For something, there is a $5 million estate tax exemption. Under current law the exclusion is merged with the present tax exemption. If the overall value of your estate is more than $5 million you would do well to lower its value to gain estate tax performance. Since these two levies are combined, if you were to use some portion of this $5 million to give tax-free presents while you are still alive that amount would be subtracted from your available estate tax exclusion.
In addition to the exemption, each taxpayer might offer up to $13,000 annually to a limitless variety of present receivers, complimentary of the present tax without affecting their life time unified gift/estate tax exemption. This is something that can be utilized to fantastic benefit if you make yearly gifts to a number of various individuals over a sustained period of time.
Lifetime gifting can likewise work to those who are trying to find methods to “spend down” their properties in an effort to get approved for Medicaid to pay for long-term care. There is, nevertheless, the 5 year “recall” duration to consider. Making considerable presents within five years of obtaining Medicaid to spend for long-term care can result in a penalty, typically an extension of time before you might certify for Medicaid advantages.
So you should carefully plan ahead to make the most of this chance. And there are numerous methods to present assets, some more advantageous than others. The best method to do so is with the assistance of an estate planning lawyer who has a wealth of experience assisting clients prepare to resolve long-lasting care expenses.