One of the questions that we often get when we talk about the details of asset preservation trusts is whether or not putting your assets into one, to protect your life savings from long-term care costs, will require you to pay gift tax on it. When people think about gift taxes, they usually just think about the annual exemption. But, there is also a lifetime exemption called the gift and estate tax exemption.
In this Elder Law Minute, Wes Coulson, Southern Illinois Elder Law attorney, discusses the gift and estate tax exemption and explains why putting assets into an asset preservation trust will not trigger a gift tax liability.
Will I have to pay gift tax when I put assets into an asset preservation trust?
Hi, I’m Wes Coulson and this is your Elder Law Minute. This is another in our series on the use of asset preservation trusts to protect your life savings from long-term care costs. They are a very, very effective tool. One of the questions that we often get when we talk about the details of that is, “Well, is that going to trigger a gift tax liability?” The answer in practical terms is, “No,” and here’s why.
When people think about gift taxes, they usually just think about the annual exemption. Right now in 2017, $14,000 for gift donor to recipient per year. But, you also have a lifetime, what’s called actually gift and estate tax exemption. Right now for an individual it’s just under five and a half million dollars; for a couple just under eleven million dollars. People think of that as just the estate tax exemption. But, what the IRS says is, “Well that’s how much you can give away without a tax. You can either do that while you’re still alive, in which case no gift tax; or you can do it when you die, in which case no estate tax.”
Your accountant can talk to you about whether you need to file a gift tax return. But, even if you do, there’s not going to be a tax due. So, I hope that clears things up. Thanks.
For more information on Asset Preservation Planning, visit these articles:
- The Sooner the Look-Back Period Starts, the Sooner It Ends
- Why do I need an Asset Preservation Plan?
- Long Term Care Costs: The Biggest Threat to your Financial Future
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Dent-Coulson Elder Law is dedicated to providing families in the St. Louis area with their Elder Law needs. Our practice areas include Asset Preservation Planning, Veterans Benefits, Medicaid Eligibility, Alzheimer’s Planning, Special Needs Planning, Estate Planning and more. We understand the financial challenges you may face as you and your loved ones grow older. At Dent-Coulson Elder Law, our clients’ well-being is our number one priority. For immediate help, call (877)995-6876 or Contact Us and we will get in touch as soon as possible.