Gift Tax Law

[spottedpony]

What is the name of your state (only U.S. law)? Illinois

My husband's parents have a considerable amount of money in savings accounts. They just sold a substantial amount of farm equipment.
My father in law is in poor health. They have no trust. I am trying to protect some of their estate, because I fear that all too soon he will need nursing home care, which could take all their estate fast. My mother in law is quite a bit younger and in good health. I am worried about her future.


I was thinking of setting up a savings account ,like a gift account and put the money in it for them if it is needed while they are living.

Can they gift this money, and if so, who is responsible for paying the taxes and how is that figured?

I know they have not been wise in protecting their estate, but now I'm afraid his Dad won't live long enough (36months) for a trust to do them or us any good. They own their home.

Any ideas or suggestion?
Thanks
becky

 

[anteater]

Can they gift this money, and if so, who is responsible for paying the taxes and how is that figured?

Can they? Sure. If they gift it to you, they may have gift tax reporting obligations.

The recipient of a gift does not have any income tax consequences. The giver of a gift must file a gift tax return for any gifts to any one person in any one year that, in total, are greater than the annual gift exclusion - currently $13,000. These are called reportable gifts. Gift tax does not have to be paid until the reportable gifts are greater than $1 million in a person's lifetime. However, the reportable gifts do decrease the estate tax credit.

...but now I'm afraid his Dad won't live long enough (36months) for a trust to do them or us any good.

1) The lookback period for possible Medicaid disqualification is now 60 months.
2) The gift approach that you mention is also subject to that lookback.
3) The Medicaid process does allow the spouse to retain some amount of assets. That amount varies somewhat by state.

Medicaid planning and qualification is a complex area. I suggest that you seek out an experienced elder law attorney in your state for a consultation.