My mother has a Revocable Living Trust. My sister and I are the trustees. Mom has dementia, and has been in a nursing home for 6 years. She's now on hospice. She never wanted all her money to be spent on nursing homes. Can my sister and I grant a tax free gift to each of mom's 5 children, beginning in 2012 and continuing until the money is all gifted? Is the gift amount allowed, $13,000 per person?
Country relating to Question: United States
State (if USA): Illinois
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Hello, I will be happy to assist you with your question. Please note that I cannot provide legal advice – I can only give you information concerning the legal issues raised by your question. I DO NOT receive credit for my work until you rate my answer as OK service” or higher. Please DO NOT RATE MY ANSWER as "Bad service" or "Poor service" (or the 2 stars on the left if you see stars), as such a rating leaves negative feedback for me personally. Instead, if you feel one of those ratings would be appropriate, please reply to me via the REPLY or CONTINUE CONVERSATION button with the issue you have, and I will be happy to continue further and do everything I can to provide you with the service you seek.Your Answer:Gifts may be made up to $13,000 per person per year without facing any gift tax consequence.However, unless the trust authorizes the trustee to implement a gifting strategy, then the trustee cannot gift that money to the children.If there is cash that is not in trust, a power of attorney document would have to authorize gifting.Without an authorization to engage in such practice of gifting, you might later find the state attempting to undo those gifts so they can recover money spent on your mother's care.Even if you could validly make the gifts that you propose making (i.e., if the trust or power of attorney authorizes such gifts or even if your mother made those gifts herself), any gift made is considered an available resource to your mother for five years after the gift.That means that if she tries to qualify for Medicaid within that 5 year period, the money she gifted will be counted in determining whether her resources/assets exceed the applicable limit (which is low -- around $2,000).If counting the value of those gifts would disqualify her, Medicaid would impose a penalty period before paying for her care. This penalty period is calculated based on the value of the gifts and the average costs of care. For example, if average costs were $50,000 per year and the gifts were worth $100,000, then a 2-year penalty would be imposed.There may be Medicare coverage for hospice stay, which would mean that you wouldn't need to worry about her retaining her assets.http://www.medicare.gov/publications/pubs/pdf/hosplg.pdf
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Wills, Trusts, Probate & other Estate Matters
Should I have the Trust and my POA examined by an attorney to define my rights as Trustee?
That would be ideal. You might learn you have the authority to carry out the gifting plan you desire -- that's the only way to know for sure (other than your own review and trusting that you understand everything you read).If you need additional clarification, please do let me know. And, again, I DO NOT receive credit for my work until you rate my answer as “OK service” or higher. Bonuses are always appreciated.If you later open a new question and would like my assistance, please begin the question with “To TMcJD….” This will ensure that only I answer the question. Thanks.
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