By Daniel S. Williford

The holiday season and the end of year always comes at a time when people are looking to gift for a variety of reasons.  Depending upon an individual’s circumstances, there are always certain elements of gifting to think about and how it may affect your own long-term care and tax planning. 

 Continue Your Pattern of Gifting

Certain individuals complete a pattern of gifting every year to reduce the level of their taxable estate.  Each individual can complete a $15,000 gift each to as many individuals as they choose in a given year and not have to file a gift tax return.  If a person exceeds this amount in a given year then they would have to file a federal gift tax return and the amount portrayed on the return would be added to their taxable estate upon their passing.  Completing these gifts every year can result in substantial estate tax savings.

In order to continue this same pattern of gifting if an individual loses mental capacity, they would have to have a Power of Attorney allowing for gifting authority.  Starting in 2010, this entails completing a Statutory Major Gifts Rider addendum that incorporates gifting the federal gift tax exclusion amount every year.     

 Medicaid Transfer Exemptions

Under New York State Social Services Law, uncompensated transfers or gifts made in the five-year period prior to someone needing long term skilled nursing care will result in an ineligibility period.  The ineligibility period is calculated by dividing the total number of gifts by the regional rate (2019 regional rate for Monroe County is $12,342).  In other words, if someone has made $123,420 worth of gifts during the five-year look back period, the person will be ineligible for Medicaid for 10 months. 

When determining Medicaid eligibility, there are many transfers under current law that do not result in any transfer penalties.  It is always important to know which transfers are exempt and how to conduct each type of transfer if the need should arise.  Gifts between spouses or to a disabled child, for example, are exempt gifts under the Medicaid rules.    

Most counties, including Monroe County, focus on all transactions of $2,000 or more.  If you are an individual who makes cash gifts at holiday time and may be subject to a 5-year look back period due to your health, do not take a lump sum of cash for more than $2,000 out of the bank to make the cash gifts.  Make individual transfers of less than $2,000 to complete these gifts.          

 New York State Clawback of Gifts

On April 12, 2019, Governor Cuomo signed the New York Fiscal Year 2020 budget.  Under this budget, certain taxable gifts made by New York residents within three years of death up through the new expiration date of December 31, 2025 (the “three-year clawback”) would be includable in an individual’s New York taxable estate.  The three-year clawback had previously expired on January 1, 2019.  This budget bill retroactively brings certain taxable gifts back into someone’s taxable estate.

There is no New York state gift tax as mentioned above in the first paragraph like with federally taxable estates, but this budget bill retroactively incorporates gifts made within three years of death into a New Yorker’s estate for estate tax purposes.    

For assistance with these matters, please contact a member of our estate planning practice

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.

About MCCM

McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979.  With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.

We represent a diverse range of clients located throughout New York State and New England.  They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts.  For more information, please contact us at 585.546.2500.