A Gift Isn’t Treated The Same Under IRS and Florida Medicaid Rule

You decide that you want to make a gift to a favorite family member or friend. You write a check and send it off in the mail with that warm feeling that generous acts can inspire. Who would ever stop to think that making a gift could cause you harm? The hidden trap with gifting is that many people are familiar with the IRS annual gifting rules, but they are not familiar with the Florida Medicaid rules.

The IRS annual gifting rules allow you to give away $14,000 per year (2014 limit) to as many individual people as you wish without having to file a gift tax return or pay gift tax. In addition, the recipient of the gift doesn’t pay income tax on the gift. What a great deal!

However, the great deal can sour if the person making the gift needs to turn to Florida Medicaid to help pay for the costs of long-term care within 5 years of making the gift because there is not a $14,000 per year “free pass” for gifting under the Florida Medicaid rules. Gifts of more than a small amount can lead to eligibility penalties because the IRS gifting rules and the Florida Medicaid rules are not the same rules.

Until you are faced with the staggering costs of paying for long-term care, you may think that you don’t have to worry about the Florida Medicaid rules. You took your responsibility to save for retirement seriously and have a modest nest egg that is adequate for your retirement needs. You, like most loving parents, want to share part of your nest egg with your family.

However, when the high costs of long-term care become a reality, many people who never thought they would have to turn to government benefits for anything, find out that they have no other viable option for paying for the costs of long-term care because the nest egg that was adequate for retirement is woefully inadequate to absorb the costs of long-term care.

Living involves a balance between the present and the future. Because no one has a crystal ball, one of the few things in our control in trying to make decisions for today and prepare for the future is knowledge. When making gifting decisions, just be aware that the IRS gifting rules and the Florida Medicaid gifting rules are not the same rules.