HOBBIES ARE GOOD FOR YOUR HEALTH

Do you have a hobby? Hobbies can give meaning and purpose to your life in retirement. As Robert Putnam points out in his book, Bowling Alone, it’s easy to discount the importance of hobbies and social engagements. Putnam details the widespread decline in civic engagement, from PTA memberships to neighborhood potlucks and bowling leagues. Over a couple of generations, Americans have misplaced the concept of free time.

SPECIAL PLANS FOR YOUR SPECIAL PEOPLE

Lily is a beautiful, active and full of personality toddler who happens to have Down syndrome. Lily’s parents and I have been friends for years and I have the continuing pleasure of watching Lily and her siblings grow up. While Lily is becoming a physical therapy rock star and hitting all her milestones in a timely fashion, her parents have started planning for the future.

….FULL ARTICLE

WHY WE ENJOY OUR HOBBIES

The Merriam-Webster dictionary defines a hobby as “a pursuit outside one’s regular occupation, engaged in especially for relaxation.” Hobbies include anything from playing a musical instrument to gardening, bird watching or sewing. A hobby is a way of focusing on something you enjoy just for the sake of that enjoyment. It may also be a way to clear your mental palette. You could be stressed out by a situation at work or the challenges of raising children and need an escape.

….FULL ARTICLE

….FULL ARTICLE

Use the buttons below to scroll through more great articles from Living Well 60 + Magazine

MORE ARTICLES

Be Sociable, Share!

Share on Facebook Share on Twitter Share on Delicious Share on Digg Share on Google Bookmarks Share on LinkedIn Share on LiveJournal Share on Newsvine Share on Reddit Share on Stumble Upon Share on Tumblr

MORE ARTICLES

CONTACT INFORMATION

© Living Well 60+ Magazine - All rights reserved | Design by PurplePatch Innovations

MORE FROM ROCKPOINT PUBLISHING

LIVING WELL 60+ MAGAZINE

HOME | FEATURE ARTICLES | COLUMN ARTICLES | DIGITAL ISSUES | CALENDAR | DIRECTORY | ABOUT | CONTACT

subscribe to living Well 60+

The Gift Tax Rule is exclusively a tax rule.  It is not a Medicaid rule.  Medicaid does not take the gift tax rule into consideration and will penalize gifts made in the five years prior to the Medicaid application.


Medicaid considers any gifts made in the five years prior to an application for Medicaid financial assistance to be made in contemplation of that assistance.  Thus, Medicaid will assign a penalty period for gifts made within the five year “lookback” which starts when the client is “otherwise eligible” (eligible except for the gift) and has applied at the Medicaid office for assistance.  Medicaid calculates a penalty which is a period of time of ineligibility for financial assistance.


For clients who have done no planning and now have a family member residing in a nursing home, lifetime gifting can still be beneficial as the family may be able to preserve up to half of the value of the gift by “curing” the gift in a “give-and-give-back” or “half-a-loaf ” strategy. This involves returning a portion of the gift in a prescribed manner and reapplying for Medicaid in a timely way. This strategy should only be done with an attorney’s help and supervision.


Possible Tax Concerns for Gift Recipients


While the gift-giver will likely not have tax consequences for giving the gift and the gift recipient will not pay income tax on the gift, the recipient still needs to be aware of potential capital gains income taxes when he wishes to liquidate the asset.  Under federal law, the new owner of the gifted asset retains the cost basis (often the acquisition cost) of the gift giver. Thus, if the gift giver’s home is the subject of the gift and the gift giver purchased the home for 25 percent of its current value, the gift-recipient owner, when selling the house, will incur a capital gain of 75 percent of the sale price.  To avoid this result, the home can be sold by the gift giver using his $250,000 capital gains tax exclusion and gift the cash.


Conclusion


If you are thinking about using a gifting strategy in conjunction with your estate plans, you should contact an elder law attorney.  Gifting can be a wonderful planning technique if you are able to weigh the benefits and consequences.


SOURCES:

Joint Committee on Taxation, “History, Present Law, and Analysis of the Federal Wealth Transfer Tax System,” March 16, 2015

Are you afraid to give a gift of more than $14,000 in any one year because you will have to pay taxes?  Are you confident that making the $14,000 annual gift will keep you Medicaid complaint?


If you ask an adult American how much they can give away each year without paying taxes, most will automatically respond, “$14,000.” It has become almost a part of the American DNA. Unfortunately, most people misunderstand the rule.


The Gift Tax Rule


The annual gift tax exclusion is really a reporting rule.  Any gift over $14,000 must be reported on a federal gift tax return, IRS form 709.  This does not mean that you pay tax on it.  Gifts reported on Form 709 count towards the lifetime federal gift tax exclusion (which in 2016 is $5.45 million per person).  No tax is owed until the gift-giver exceeds total gifts of $5.45 million.


Annual gift-givers can give to as many people as they wish.  The $14,000 figure applies to gifts made to each individual person, not the total of the gifts made in a single year.


Married couples can double the gift amount without being required

WHAT YOU DON’T KNOW ABOUT GIFTING, THE $14,000 ANNUAL GIFT EXCLUSION, AND MEDICAID.

to report.  Yes, a married couple, can for example, give $28,000 to each of their children (and their spouses) without having to report the gift.


With proper planning, a married couple can gift $10.9 million, plus as many annual gifts as they choose, without paying gift tax.


Why the Gift Tax Rule Doesn’t Matter


With the gift tax exclusion being at $5.45 million, few estates are paying federal gift tax.  In fact, 99.8% of estates do not owe gift tax.  That means that only the richest 0.2% of Americans are actually affected by this rule.


If you want to give a large gift to a child or another loved one, there is likely nothing holding you back.  Most Americans will simply not gift more than $5.45 million in their lifetime.  There is no reason to fear, give your gift, fill out your Form 709, and enjoy.


Gifting and Medicaid

MARY ELLIS PATTON

Mary Ellis Patton is an associate at Bluegrass Elderlaw, PLLC in Lexington, Kentucky. In her practice, Mary uses customized Powers-of- Attorney, Wills, and Trusts to help clients to achieve their financial, legal, and health care goals. Mary is licensed to practice law in both Kentucky and Ohio. She is the author of Chapter 13, Age Discrimination, of the Kentucky Practice Series, Elder Law Volume.

more articles by mary ellis patton