How Gifting Affects Your Estate Plan and Medicaid Eligibility
The season of giving is upon us once again! While the holiday spirit inspires many individuals to give gifts to their loved ones, large gifts can have potential effects on your estate plan and Medicaid eligibility. If you want to make a large gift this holiday season, this blog post will discuss estate and inheritance taxes, how gifts affect Medicaid eligibility, and how estate planning can be used to protect your recipients. Each financial circumstance is unique, so it can be beneficial to contact an estate planning attorney, like the ones at Malm & LaFave, S.C., to ensure your individual needs are met.
Gifting
Estate Tax and Inheritance Tax
When it comes to gifting your assets, many individuals are concerned with potential taxes on their estates or recipients. Wisconsin currently does not have estate tax or inheritance tax. In fact, most estates are not subject to any estate tax, including federal estate tax, according to the current IRS rules. As of 2023, any estate worth less than $12.9 million for a single person is exempt from federal estate tax. This exemption covers both gifts and estate taxes. This limit, however, will only extend to 2025 unless the law is changed. So, if your estate is valued more than this limit, it can be beneficial to consult an estate planning attorney or tax professional to consider your specific tax circumstances.
Gifting
According to current tax rules, a single person can gift any number of people up to $17,000 each year without being taxed. Recipients are usually not required to pay taxes or report the gift. However, any gift more than $17,000 to a single person during a year must be reported by the gifter/donar using a gift tax return. Even if the gift is under the limit, large gifts can still affect your estate plan and Title 19/Medicaid eligibility. Contacting an estate planning attorney can ensure your assets are properly protected.
Protecting the Recipient of your Gift
In some circumstances, the person receiving your monetary or physical gift may not be ready or able to handle a considerable amount of money right away. Estate planning, such as a trust, can be used to protect the safety of your gift. A trust can distribute the gift to a desired beneficiary according to your specific terms. For example, money can be held in your trust until the recipient turns 18, graduates college, gets married, etc. Whatever your wishes, trusts can be used in a variety of ways to protect your assets and money.
Title 19/ Medicaid Planning
Eligibility
Gifting assets, both physical and monetary, can affect an applicant’s eligibility for Title 19. Title 19, also known as Medicaid or Medical Assistance, is a welfare program that can help pay for the costs of nursing homes and assisted living care. An applicant must be under a certain asset and income limit to qualify for Title 19. When determining eligibility, there is a five year ‘look-back’ period in Wisconsin. This means any income, assets, and gifts – no matter the amount – will be included in that assessment. If you anticipate needing long-term care within the next five years, gifting your monetary or physical assets away can affect your eligibility. Applying for Title 19 can be complex and confusing, so it can be beneficial to contact an estate planning or elder law attorney. These experienced attorneys can determine if you are eligible for Title 19 and, if not, determine what steps you can take to become eligible.
Wispact Special Needs Trust
If you are over the asset and income limit for Title 19, one way to become eligible is through a special needs trust such as Wispact. Wispact can hold an individual’s assets and is not counted against the income or asset limit. This prevents applicants from having to ‘spend down’ their assets to become eligible. Wispact applications can only be completed and submitted by a Wisconsin attorney, but it is one option to obtain Title 19 eligibility.
Durable Powers of Attorney
It is always important to have sufficient Powers of Attorney documents in the event you become incapacitated. When using a Wispact special needs trust, it is especially important to have a comprehensive Power of Attorney for Finances. This document can include specific language allowing an agent to create a Wispact trust on your behalf. Without this provision in your Power of Attorney document, your agent does not have the authority to open a special needs trust for purposes of Title 19/Medicaid planning. Though these documents can be found online, an experienced elder law attorney can ensure your Durable Power of Attorney is comprehensive for Title 19 planning purposes.
The holiday season is a wonderful time to reexamine your estate planning wishes and possibility for Title 19 planning in the coming years. Though it all seems daunting, the attorneys at Malm & LaFave, S.C. are here to help. We have over 45 years of experience dealing with elder law and estate planning concerns. Contact our office today to begin planning for your future.
Happy Holidays from Malm & LaFave, S.C.!