You’ve worked hard for your money and possessions your entire life, and you want to make sure they aren’t lost to the government or health cost bills. You might think that gifting your money to loved ones is the best option to protect your assets. Before you do, read this article to learn how that process works and about some other available options. Then check with a local Estate Planning attorney, like Auld Brothers Law Group, to learn if gifting money to protect your assets is the best option for you.
Tax Implications About Gifting Money to Protect Your Assets
There are specific laws when it comes to gifting money or assets to a loved one while you’re still alive. Every year the IRS sets a limit on the total amount of money or assets a person can give before tax implications. In 2022, each person can give up to $16,000 of combined assets (including money) without having to pay taxes (source). You can give $32,000 to for a married couple who agree to split their gifts, ie If your gift exceeds the limit, then you’ll need to file a gift tax return and track the total amount you gifted throughout the year.
If you have additional questions about taxes and gifting, the IRS has information available; click here.
Along with the tax implications, there are specific rules you’ll need to follow when gifting certain assets to a loved one or charity. Consult with an Estate Planning lawyer in your state to learn more about these processes.
Asset Protection Plans to Consider Instead of Gifting Money
Gifting money isn’t the only available choice if you want to protect your possessions. Several asset protection plans are available that might be a better choice for your circumstance.
Please note that for PA residents, you’ll want to consult with a local Estate Planning attorney because they are familiar with the legal and strategic barriers to guard your assets against the state and others.
Option #1 Creating a Trust
Trusts offer an alternative to gifting. It allows your beneficiaries to receive the items you leave faster than only using a Will. There are several types of Trusts, including:
- Asset Protection Trusts
- Charitable Trusts
- Irrevocable Trust
- Revocable Trust
- Protective Trust
Option #2 Retitling Assets
This option allows you to pass on ownership to your loved ones by legally changing the item’s owner to the person of your choice. This will prevent anyone from gaining ownership over your assets (debt collectors, healthcare costs, etc.).
Option #3 Developing an All-Inclusive Estate Plan
An estate plan is a combination of legally binding documents that help to protect your wishes after your passing. It includes:
- Instructions for estate management
- Listing beneficiaries
- Advance directives
- Medicaid planning
- Tax planning (state and federal)
Medicaid Eligibility and Protecting Your Assets
We’ve been asked several times about Medicaid eligibility and assets. There’s a common misconception that if a person gifts their money/assets or even places them in a Revocable or Living Trust, they can protect their possessions from Medicaid and nursing home costs. Unfortunately, that isn’t an option unless you’re planning over five years ahead in the future.
In Pennsylvania, the Medicaid program is only available to low-income people, so you’ll need to list all your money and assets when you apply. This includes any items that have been gifted or moved into a Trust within the last five years. You can read our article about covering nursing home costs to learn more about this situation. Read here.
Are You Ready to Protect Your Assets?
At Auld Brothers Law Group, our goal is to guide you through the legal process of protecting your assets with clear, straightforward information. We’re available to answer your questions and help to start the process. Contact us for a free consultation.