Pitfalls for Families With Aged Loved Ones
Old age and potential incapacity can raise some difficult questions for elderly parents and their children. In this situation, what feels like common sense to some may, in fact, be a serious mistake. That is why it is crucial for families to consult an experienced attorney when making plans for an aging parent or relative.
Specifically, one of the most common reactions people have to mounting long-term care bills and the prospect of applying for Medicaid is to start giving away their property to family members. They assume that the property should be protected from their creditors as long as it is in someone else's name. Strategic gifting can be an excellent planning strategy when carried out correctly and under the right circumstances. However, under the wrong circumstances it can be, at best, ineffective and, at worst, significantly damaging for both tax and Medicaid reasons:
- Making significant gifts prematurely can leave the donor with insufficient resources for self-support.
- Without proper planning and adjustment, making large gifts of property can play havoc with an existing estate plan and can also create discord among relatives.
- Large one-time gifts that exceed the IRS's annual exclusion of $14,000 are generally ineffective for minimizing federal estate tax and may result in tax liability.
- Most outright gifts, with only a few exceptions, can prevent a donor from receiving Medicaid coverage for a period of months or years even when he or she otherwise qualifies.
This is not to say that there are no choices for aging Floridians who want to leave something behind for their children and to protect their assets from being consumed by long-term care expenses. An experienced Florida Medicaid planning lawyer can determine what options are available and appropriate under your particular circumstances.