One of the most common questions we hear as estate planners is, “How much can I give in gifts without owing any taxes?”
The quick answer is as follows:
The annual exclusion from federal gift taxes in 2020 is $15,000 per donee, and there is no New York State gift tax.
This means that if you are a New York resident and give $15,000 or less to one or more people or entities, then those gifts will not be subject to any gift tax (federal or state).
Although this answer is short and to the point, it does not provide the full picture and there are many broader things to consider when gifting assets.
One such thing that we typically advise clients to think about before making gifts is Medicaid eligibility.
A common misconception is that if you give gifts equal to or less than the annual exclusion for federal gift tax then this gift will be exempt from Medicaid’s five-year-look-back period. This is WRONG.
The annual exclusion for gift tax is a tax rule and does not apply to the Medicaid rules in this context.
Even if you gifted money to a loved one for $15,000 or less in value, Medicaid will still count it as a transfer that could make you subject to a transfer penalty period for Chronic Care Medicaid (nursing home) should you apply for it within 5 years from the date the gift is made. This is why it is extremely important to speak with an experienced Elder Law attorney before making gifts when Medicaid benefits may be necessary for the future.
We Can Help
An experienced Elder Law attorney will be able to help you traverse through the complex Medicaid and tax rules and regulations in order to strategically accomplish your goals while mitigating the impact on your tax liability and long-term care planning.