What You Need to Know About Planning and Gifting

As you age and plan for your estate and your health, how you will distribute and gift your assets is surely an important consideration. In addition to estate planning and gifting, how your taxes and gifts may affect your eligibility for MassHealth (a/k/a Medicaid) is essential to understand. Massachusetts estate planning lawyer Patricia Bloom-McDonald, can help you to understand how gifting may affect your eligibility, and what you can do to preserve your assets.

What Is MassHealth?

In Massachusetts, Medicaid is known as MassHealth.  Those who are covered under MassHealth are able to receive a wide array of health services, ranging from prescription drugs to doctors’ visits, at a very low cost, or even free.

Eligibility for Long-Term-Care MassHealth benefits is dependent upon necessity of assistance with Areas of Daily Living [“ADL”] and income level; you must be considered low income in order to qualify. For elderly persons (those aged 65 and older), income rules are strict, and having more than $2,000.00 in assets can disqualify you from eligibility.

Gifting and MassHealth Penalties

When a person applies for MassHealth, they have a legal duty to disclose any gifts or transfers of assets given within a five-year period prior to the date of the application. This is extremely important to understand because certain gifts and transfers can affect eligibility for MassHealth. In fact, any gifts that are made in the five years preceding a MassHealth application can result in penalties, regardless of the purpose of the gift.

Luckily, there are some gifts and types of transfers that can be made without incurring any penalties or disqualifying you from MassHealth benefits. These includes transfers to:

  • – Your spouse (as long as your spouse is a United States citizen – otherwise, you may have to pay a gift tax on this transfer);
  • – A special needs trust;
  • – A disabled person; or
  • – A pooled trust.

In some cases, you may even be able to transfer your home to another party, such as a sibling, or child.

How Taxes Affect MassHealth

Again, you are required to provide all information about your finances when applying for MassHealth. This includes information about your taxes, including income, deductions, property, etc..

Did you know:

  1. 1. The estate tax is separate from the income tax, and is paid on the net value of all your assets, including life insurance, and retirement accounts owned at your death in excess of the exempt amount?
  2. 2. The federal estate tax rate is currently 40% (in 2017)?
  3. 3. The Massachusetts estate tax rate is approximately 10%
  4. 4. The federal estate tax exemption is $5 million in 2017 ($5,490,000 when adjusted for inflation)
  5. 5. The Massachusetts estate tax exemption is $1 million
  6. 6. For most families, estate taxes are totally voluntary?  Only people who fail to plan will end up paying estate taxes.

How an Elder Law Attorney Can Help You Plan

As you age, ensuring that you have adequate healthcare services is essential. Too often, people are not thinking five years in the future, and may make financial decisions now that jeopardize their right to such benefits later. To understand your rights and eligibility for MassHealth, and how tax planning and gifting may affect eligibility, contact elder law attorney Patricia Bloom-McDonald online or by phone today. You can fill out the contact form with your information, and Patricia Bloom-McDonald will get in touch shortly.