The Listen to Lawrence Letter: Annual Gift Exclusion and Medicaid

CLIENT QUESTION:

I have an irrevocable trust that you set up for me years ago. If I wanted to gift $10,000 to any or all of my three grandchildren who are beneficiaries, do I start the 5-year lookback again? It is not an early inheritance but a gift? Thank you.

MY RESPONSE:

Some gifts escape the gift tax system. These are called the annual exclusion. The current annual exclusion (no reporting and no tax) is currently $19,000 per year per person. It used to be $10,000, but it has crept up due to inflation.

THE ANNUAL EXCLUSION HAS NOTHING TO DO WITH MEDICAID!

All gifts, whether taxable or not, whether reportable or not, are subject to the

5-year lookback and subsequent penalties.

Sorry ☹

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