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Legal Notes: Misconceptions About Gift Giving

tipped glass jar with bow spilling out penniesSome seniors desire to help close family members by giving them their valuable assets or sizable monetary gifts. Maybe there is a desire to help a family member financially by giving cash, or by paying for college. Sometimes seniors ask me if it is true that they are allowed to give gifts of up to $15,000.00 per year and still be eligible for the MassHealth payment of nursing home care. The answer is always “no.” The $15,000.00 per year allowable limit of gifting pertains only to the IRS federal gift tax code. That gifting allowance amount has no relation at all to the MassHealth regulations. MassHealth is the state health care program for low income individuals that also pays for long term nursing home care for eligible low income individuals with an asset limit of $2,000.00. It is a very common misconception. The federal gift tax code allows taxpayers to make yearly gifts of up to $15,000.00 before requiring a gift tax return filing (but not necessarily payment of taxes for non multi-millionaires) of a federal gift tax return. MassHealth rules for financial eligibility for payment of nursing home care do not allow any gifts (unless in very strict limited circumstances to only a couple of specific individuals) within the five years before applying for MassHealth. In other words, although giving gifts of up to $15,000.00 value would not be a federal taxable event for federal gift tax purposes in most cases; any gifts given or assets given away for less than fair market value of a sizable amount could for most people be a disqualifying transfer of assets for MassHealth payment of needed nursing home care purposes, and the MassHealth application could be denied unless it was given back.

Sometimes seniors ask me if it is true that they are allowed to give gifts of up to $15,000.00 per year and still be eligible for the MassHealth payment of nursing home care. The answer is always “no.”

Most gifts given are intended only for the best reasons, and not given to remove assets from the estate only to be eligible for MassHealth. Seek legal advice before wanting to give away assets or monetary gifts. Wanting to help out a close family member financially by giving sizable cash gifts or valuable assets, if gifted prior to five years before applying for MassHealth benefits, could likely cause a disqualification of needed care. A majority of people need not be concerned about the federal gift tax annual exclusion of filing a gift tax return because it doesn’t affect them, but many people need to be aware of the MassHealth five year look back period of gifting assets for less than fair market value. See an elder law and estate planning attorney for the best advice for your specific financial situation.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640. Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.