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RBMunkin: " . . . if an elderly couple is gifting their children as a kind of "pre-inheritance" thing, as long as it never goes over . . . ."


RBMunkin: <<<Anyway, I'll try to figure it out later. But I saw nothing about the million dollars in the IRS pub. In any case, for the couple I'm trying to help with this it doesn't matter since they will never even reach the $345K let alone the million. It looks like their concern about paying gift tax is completely unfounded and the only thing they have to worry about is filling out the form if they go over the annual exclusion amount.>>>

ptheland: "The $345,800 unified credit is the tax on $1 million of gifts.

Technically, you get a credit against your gift tax, although most people generally talk about excluding the first $1 million of gifts from tax.

Since the IRS is a rather technical bunch, their publications talk about the unified credit rather than excluding gifts from tax.

In the end, it's the same thing."

Sorry for stringing a few posts together, but I am concerned that DIY estate planning performed because of an irrational fear of gift taxes will harm the couple for whom you are seeking advice.

Are the couple aware of the Medicaid look-back rules?

"The Deficit Reduction Act (DRA) made several important changes to the Medicaid asset-transfer rules. The look-back period for asset transfers was extended from 3 years to 5 years and the start of the penalty period or ineligibility period for transferred assets was changed from the date of the transfer of assets to the date when the elderly person applies for Medicaid and is otherwise qualified for Medicaid, generally at the time he or she enters a nursing home. Simply put, one of the key requirements for Medicaid eligibility is that the elderly person lacks assets, meaning he or she cannot afford to pay for nursing home care. However, Medicaid will look back 5 years to see if the elderly person transferred any assets for less than fair market value, and if so, will deny Medicaid benefits for a period of time (the ineligibility period) based on the amount of assets transferred. [emphasis added]

The DRA took effect on February 8, 2006, but, because Medicaid is a joint federal and state program, the states are required to apply the DRA to their state programs. Some states will have to change their Medicaid rules, and many of those states are not yet operating under the DRA. Therefore, be sure to find out the law in your state before making any decisions."

Also, one of the spouses of the couple may significantly outline the other, an how will she (or he) support her/him-self if substanitally all of the assets are given to the children as a "pre-inheritance"?

DIY estate planning is fraught with peril for the DIY'ers.

Regards, JAFO
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