It’s no secret that the price of medical care is extremely high and this of course makes health care insurance very expensive as well. This is true across the board, but when you are diagnosed, treated, and released you and/or your insurance company gets billed for the treatment and that’s the end of it. But if you should have to spend an open-ended period of time in a hospital, nursing home, or assisted living facility, the costs can be ongoing and difficult to absorb depending on your means.
The issue of health care is related to elder law and incapacity planning, but there is an aspect of estate planning that is connected as well that many people are not aware of. If the worth of your estate exceeds the estate tax exclusion you are going to want to employ strategies to reduce its taxable value, and one of these is the practice of tax-free gift giving. Because the federal government is aware of the fact that you could give away money to your heirs to circumvent the estate tax, there is a gift tax, and it is unified with the estate tax. So if you use the lifetime gift tax exemption it will count against your estate tax exclusion.
However, there are other types of gift-tax exemptions, and one of them allows you to give medical gifts. An individual can pay the medical expenses of any number of people totaling an unlimited amount of money free of the gift tax. What’s more, medical gifts in this context would include health care insurance, including some long-term care coverage. You could also use this exemption to pay for the nursing home or assisted living costs of anyone you choose completely free of the gift tax. This can be a life changing gift that provides you with some estate tax efficiency as a reward for your generosity.
- Important Subjects to Discuss with Your Estate Planning Attorney - January 23, 2023
- Planning for the Possibility of Dementia - January 20, 2023
- How to Prepare for Retirement - January 17, 2023
