Transferring property to loved ones might seem like a simple, generous act, but there’s more going on behind the scenes than many people realize. Whether you’re giving away your home, a large sum of money, or other assets, it’s essential to understand how gifting can affect your taxes, long-term care planning, and future estate. At E.A. Goodman Law, LLC, we can help you make smart, informed decisions that protect your goals and your family.
Understanding the Gift Tax Basics
The IRS defines a “gift” as any transfer of money or property where you don’t receive something of equal value in return. That includes giving your child a car, transferring a vacation home, or handing over a large check for a wedding. Some gifts are entirely tax-free, but others may need to be reported.
Here’s how it generally works:
- In 2025, you can give up to $19,000 per person without triggering a gift tax reporting requirement. This is called the annual exclusion.
- If you give more than $19,000 to one person in a single year, the excess amount counts toward your lifetime gift and estate tax exemption, which is $13.99 million per person in 2025.
- You won’t pay gift tax unless you exceed that lifetime limit, but you must file a gift tax return if your gift exceeds the annual exclusion.
Most people never owe gift taxes, but reporting is key. Failing to document gifts properly can create tax complications down the road, especially when preparing your estate.
Medicaid and the Five-Year Look-Back Rule
If you may need long-term care in the future, gifting property becomes even more complicated. Medicaid has rules in place to prevent individuals from giving away their assets immediately before applying for assistance. This is where the five-year look-back rule comes in.
Medicaid reviews all asset transfers made within the 60 months before you apply. If you gave away property or money during that period, you could face a penalty period where you’re ineligible for benefits, even if you no longer have the resources to pay for care.
For example:
- If you transferred your home to your daughter three years before applying, Medicaid might calculate a penalty based on the home’s value.
- That could delay your eligibility for months or even years.
This rule applies to any transfer for less than fair market value, not just outright gifts.
Exceptions and Exempt Transfers
Not every gift results in a penalty. Medicaid allows certain transfers without imposing a penalty, but these exceptions are narrow and must be handled with care.
Some penalty-free transfers include:
- Gifts to a spouse
- Transfers to a blind or disabled child
- Transfers to a child under 21
- Transfers to a child who lived in your home and provided care for at least two years (in specific circumstances)
- Transfers to a sibling with equity in the home who also lived there for at least one year before the transfer
Each exception has its own rules and documentation requirements. It’s easy to make a well-meaning gift that turns into a problem later. We’ll help you look at the full picture before taking that step.
Why Timing and Documentation Matter
When it comes to gifting, timing is everything. A well-timed and documented gift can benefit both you and your loved ones. However, rushing into it or failing to maintain accurate records can create problems with the IRS or interfere with Medicaid eligibility.
If you’re thinking of giving away property or financial assets:
- Keep written records of what was gifted, when, and to whom
- Consider the long-term consequences, especially if you may need care within five years
- Talk to a legal professional before making large transfers
Gifting can be a meaningful way to share your resources, but it should always be done with care and planning.
How We Can Help You Plan Gifting Strategies Wisely
At E.A. Goodman Law, LLC, we work closely with clients who want to support their loved ones while protecting their own futures. We help you think through all the moving pieces—taxes, Medicaid eligibility, estate planning goals—and put together a plan that works.
If your gifting strategy includes transferring your home, setting up trusts, or planning for long-term care, we’ll guide you through it step by step. We also partner with financial professionals when needed to ensure your plan is sound from every angle.
Contact E.A. Goodman Law, LLC today to schedule a consultation and find out how we can help you plan gifts that protect what matters most.
Posted in: Estate Tax