Clients often ask, “How much can I gift someone without incurring taxes?” While Massachusetts has no gift tax, there is a federal gift tax, albeit with a VERY high exemption. In 2020, the annual reporting requirement for gifts is $15,000 per donee. So, if you have three adult kids, you could give $15,000 or less to each one, and not report anything (married couples can give $30,000). If you give MORE than that then you’re required to file a gift tax return as part of your income taxes that reports the gifts made. There’s no tax due, however. The government is just keeping track so when you pass, they’ll add up the value of your estate plus the reported gifts you made. If that totals over the federal estate and gift tax exemption (currently $11.5 million per person, $22 million for couples) then and only then would a gift tax be due; not something most people need to worry about.
There’s one important point that older adults should keep in mind when considering gifting money to their loved ones, and that’s MassHealth (Medicaid) eligibility. MassHealth is a joint federal/state program designed to pay for long-term care once a person’s funds and assets are extremely limited. Even though you might not incur a gift tax, that monetary gift will still be considered as part of your assets when it comes to MassHealth’s five-year-look-back period.
When someone applies for MassHealth, MassHealth has the right to examine an applicant’s bank and financial records for up to five years immediately prior to the date of application. If they discover a transfer of assets during this period, such as a cash gift to a loved one, they will impose a disqualification period on the applicant’s eligibility (a length of time the applicant won’t be eligible for MassHealth).
It’s important to speak with an experienced Massachusetts elder law attorney before making gifts when MassHealth benefits may be necessary in the future. Call us today at (617) 299-6976 or send an email to firstname.lastname@example.org to schedule a confidential, no-cost consultation to discuss how we can help you protect your assets while planning for the possibility of long-term care.