A common misunderstanding is that the gifting limits associated with gift and estate tax issues also apply to long-term care Medicaid eligibility. It is not uncommon to see poor do-it-yourself gifting plans that are created under this misconception.

The gifting limits for the federal gift tax are inconsequential for all but the ultra-rich. The federal gift tax is tied to the federal estate tax. But both do not come in to play unless the total taxable estate exceeds the exemption amount, which is $11.58 million per individual in 2020.  As a result, federal tax rules rarely ever impact a long-term care gifting plan.

As a practical matter, the Department of Human Services disregards $500 in total gifts per calendar month as a practical matter. That said, it is highly advisable only to do strategic gifts that are consistent with an overall Medicaid or VA asset protection plan because there are no minimal excluded amounts like there are with the federal gift tax. 

When the Davis Financial Group team reviews asset protection plan alternatives, steps can be taken to minimize or reduce the overall exposure to the commonwealth’s inheritance tax. Before you do any gifting, contact our team for a free consultation.

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