You Can Give Away More Tax Free in 2018

After staying the same for five years, the amount you can give away to any one individual in a particular year without reporting the gift will increase in 2018. 

The annual gift tax exclusion for 2018 is rising from $14,000 to $15,000. This means that any person who gives away $15,000 or less to any one individual (anyone other than their spouse) does not have to report the gift or gifts to the IRS.

If you give away more than $15,000, you do not necessary have to pay taxes, but you will have to file a gift tax return (Form 709). The IRS allows individuals to give away a total of $5.6 million and couples $11.2 million (in 2018) during their lifetimes before a gift tax is owed. This $5.6 million exclusion means that even if you have to file a gift tax return (Form 709) because you gave away more than $15,000 to any one person in a particular year, you will owe taxes only if you have given away more than a total of $5.6 million (or $11.2 million) in the past. As a result, the filing of a gift tax return is merely a formality for nearly everyone.

The gift tax also applies to property other than money, such as stock. If you give away property that is worth more than $15,000 you have to report that on your gift return.

Note that gifts to a spouse are usually not subject to any federal gift taxes as long as the spouse is a U.S. citizen. If your spouse is not a U.S. citizen, you can give only $152,000 without reporting the gift (in 2018). Anything over that amount has to be reported on the gift tax return. Also, you do not need to report tax deductible gifts made to charities on a gift tax return unless you retain some interest in the gifted property.

With the increase in the gift tax, the amount you can give to an ABLE account is also increasing to $15,000. ABLE accounts allow people with disabilities and their families to save up to $100,000 in accounts for disability related expenses without jeopardizing their eligibility for Medicaid, Supplemental Security Income (SSI), and other government benefits.

Three Reasons Why Giving Your House to Your Children Isn't the Best Way to Protect It From Medicaid

You may be afraid of losing your home if you have to enter a nursing home and apply for Medicaid. While this fear is well-founded, transferring the home to your children is usually not the best way to protect it.

Although you generally do not have to sell your home in order to qualify for Medicaid coverage of nursing home care, the state could file a claim against the house after you die. If you get help from Medicaid to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called "estate recovery." If you want to protect your home from this recovery, you may be tempted to give it to your children. Here are three reasons not to:

1. Medicaid ineligibility. Transferring your house to your children (or someone else) may make you ineligible for Medicaid for a period of time. The state Medicaid agency looks at any transfers made within five years of the Medicaid application. If you made a transfer for less than market value within that time period, the state will impose a penalty period during which you will not be eligible for benefits. Depending on the house’s value, the period of Medicaid ineligibility could stretch on for years, and it would not start until the Medicaid applicant is almost completely out of money.

There are circumstances under which you can transfer a home without penalty, however, so consult a qualified elder law attorney before making any transfers. You may freely transfer your home to the following individuals without incurring a transfer penalty:

• Your spouse
• A child who is under age 21 or who is blind or disabled
• Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
• A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
• A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

2. Loss of control. By transferring your house to your children, you will no longer own the house, which means you will not have control of it. Your children can do what they want with it. In addition, if your children are sued or get divorced, the house will be vulnerable to their creditors.

3. Adverse tax consequences. Inherited property receives a "step up" in basis when you die, which means the basis is the current value of the property. However, when you give property to a child, the tax basis for the property is the same price that you purchased the property for. If your child sells the house after you die, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. The only way to avoid some or all of the tax is for the child to live in the house for at least two years before selling it. In that case, the child can exclude up to $250,000 ($500,000 for a couple) of capital gains from taxes.

Medicare Launches Hospice Compare Website

Patients looking for hospice care can now get help from Medicare’s website. The agency’s new Hospice Compare site allows patients to evaluate hospice providers according to several criteria. The site is a good start, but there is room for improvement, experts say.

Medicare's comprehensive hospice benefit covers any care that is reasonable and necessary for easing the course of a terminal illness. Medicare launched the hospice compare website to improve transparency and help families find the right hospice provider.

The website provides information on how hospices deal with treatment preferences, address a patient's beliefs and values, screen and assess for pain and shortness of breath, treat shortness of breath, and give a bowel regimen for patients treated with opioids. Patients can compare up to three hospices at a time.

Next year, the site plans to add more information, including allowing families to rate hospices as well as adding data on the number of staff visits a patient received in the final week before death.

Kaiser Health News reports that while the website is helpful to families looking for information about hospice care, experts believe it is of limited use right now. According to Dr. Joanne Lynn of the Altarum Institute, a nonprofit health systems research and consulting organization, patients looking for hospice care need different information, including the hospice staff's average caseload, the percentage of patients discharged alive, and the share of the hospice's resources devoted to at-home care versus nursing home care.

In addition to the uncertainty of the ratings, the website also has been experiencing a problem with its search function. When patients search for a provider by location, they may get agencies that do not serve their zip code. While the problem is being fixed, patients should call to confirm that hospice providers service their area.   

A robust hospice rating system is badly needed, according to a Kaiser Health Newsinvestigation. A review of 20,000 government inspection records found that hospice providers often missed visits and neglected patients who were dying at home. Families or caregivers have filed more than 3,200 complaints with state officials in the past five years.

Three Reasons Why Giving Your House to Your Child Isn't the Best Way to Protect It From Medi-Cal

Three Reasons Why Giving Your House to Your Children Isn't the Best Way to Protect It From Medi-Cal

You may be afraid of losing your home if you have to enter a nursing home and apply for Medi-Cal. While this fear is well-founded, transferring the home to your children is usually not the best way to protect it.

Although you generally do not have to sell your home in order to qualify for Medi-Cal coverage of nursing home care, the state could file a claim against the house after you die. If you get help from Medi-Cal to pay for the nursing home, the state must attempt to recoup from your estate whatever benefits it paid for your care. This is called "estate recovery." If you want to protect your home from this recovery, you may be tempted to give it to your children.

1. Medi-Cal ineligibility. Transferring your house to your children (or someone else) may make you ineligible for Medi-Cal for a period of time. The state Medi-Cal agency looks at any transfers made within five years of the Medi-Cal application. If you made a transfer for less than market value within that time period, the state will impose a penalty period during which you will not be eligible for benefits. Depending on the house’s value, the period of Medi-Cal ineligibility could stretch on for years, and it would not start until the Medi-Cal applicant is almost completely out of money.

There are circumstances under which you can transfer a home without penalty, however, so consult a qualified elder law attorney before making any transfers. You may freely transfer your home to the following individuals without incurring a transfer penalty:

Your spouse

A child who is under age 21 or who is blind or disabled

Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)

A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home

A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

2. Loss of control. By transferring your house to your children, you will no longer own the house, which means you will not have control of it. Your children can do what they want with it. In addition, if your children are sued or get divorced, the house will be vulnerable to their creditors.

3. Adverse tax consequences. Inherited property receives a "step up" in basis when you die, which means the basis is the current value of the property. However, when you give property to a child, the tax basis for the property is the same price that you purchased the property for. If your child sells the house after you die, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. The only way to avoid some or all of the tax is for the child to live in the house for at least two years before selling it. In that case, the child can exclude up to $250,000 ($500,000 for a couple) of capital gains from taxes.

There are other ways to protect a house from Medi-Cal estate recovery, including putting the home in a trust. To find out the best option in your circumstances, consult with your elder law attorney.