§2503(b)
An individual can gift annually $13,000 per donee free of gift tax. Such amount is not included in the total amount of gifts during that year if the donee actually receives the gift or can access it. In other words, such amount is “excluded” from the definition of a taxable gift. Such gifts, although excludable as a “taxable gift,” nevertheless count as a transfer for MassHealth Long Term Care eligibility purposes.
§2503(c)
Exclusion for certain transfers for educational expenses or medical expenses. The following transfers are deemed “qualified transfers” and are not treated as “gifts.”
- Tuition paid to an education organization (IRC §170()(1)(A)(ii)) for education or training of such individual (see §2503(e)(2)(A)) – room, board, books and supplies are not included; and
- Gifts to any person who provides medical care (IRC §213(a)) as payment for such medical care. Medical costs do not include amounts reimbursed by insurance companies.
Lifetime Exclusion
Current Law
The first $5 million, exclusive of transfers described above, of lifetime transfers are exempt from gift tax. This is known and referred to in the federal tax code as the gift tax applicable exclusion amount.
As stated above, the gift-excluded amount is not included in the total amount of gifts during that year if the donee actually receives the gift or can access it. The gift must be a gift of “present interest.” For example, if an individual makes a gift of $43,000 in 2011 ($30,000 above the annual exclusion amount), the taxable portion of the gift is $30,000. Said $30,000 is deducted from the lifetime exclusion remaining. A gift tax return would be required to be filed for the $30,000 gift, but no tax would be due.
These materials are intended to assist readers as a learning aid but do not constitute legal advice and, given their purpose, may omit discussion of exceptions, qualifications, or other relevant information that may affect their utility in any planning situation. Diligent effort was made to insure the accuracy of these materials but Attorney Silberstein assumes no responsibility for any reader’s reliance on them and encourages all readers to verify all items by reviewing all original sources before applying them. The reader should consider all tax and other consequences of any planning technique discussed.
Last updated January 2011