Afraid of Losing Your Home To Medicaid?

Johnson City, TN (PRWEB) November 7, 2005

Doris from Minnesota is considering transferring her assets to her son so they won’t be lost to Medicaid should she need assisted-living or nursing home care. Is that the right move? If so, what’s the best way to do it? Read on to find out.

One of the greatest financial risks seniors face is the rising cost of healthcare, including the cost of custodial care in an assisted-living facility or nursing home. And seniors are worried about this. They’ve worked hard all their lives to build a nest egg and they shudder at the thought of it being spent on their care instead of going to their children.

Some would prefer to have Medicaid (government welfare) pay their nursing home costs so they can leave their assets to their heirs. Medicaid is the government agency that pays nursing home costs for seniors.

To qualify, you can only have $2,000 in assets other than your home. (Be warned, the government has the right to sell your home when you die to recoup the amount they spent on your care.) As a result, many seniors consider gifting assets in an attempt to preserve them.

It is considered fraud to hide assets or to lie to the government when applying for Medicaid. I do not condone that in any way. Gifting, though, is a viable, legal way to protect your estate, but there are certain rules you must follow.

Most people think you can only gift $11,000 per year to someone without having to pay Federal gift taxes. Since Federal gift tax rates start at 41%, you sure want to avoid them!

It will take Doris over 10 years if she can only gift $11,000 per year of her estate. But here’s the good news: you can gift over $11,000 each year without having to pay Federal gift taxes! Each person has a lifetime gift-tax credit that results in being able to gift $1,000,000 without any Federal gift taxes.

So Doris can gift $100,000 to her son all at once. She just needs to tell the IRS to consider the part over $11,000, or $89,000, as a part of her $1,000,000 lifetime exemption. That’s done by filing Form 709 with her taxes that year.

Notice I kept referring to Federal gift taxes. You may still be subject to state gift taxes. For instance, here in Tennessee, there is a 6% tax on gifts over $10,000 per person per year and there isn’t any lifetime exclusion. Be sure to investigate the laws in your state.

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Related Articles can be found at http://www.guardingyourwealth.com under the Guarding Your Wealth Article Archive.

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