Medicaid and Estate Planning

Rick B. Weaver (Attorney at Law, Shannon, Gracey, Ratliff & Miller, L.L.P.) has recently published his article entitled How Medicaid Planning Affects Other Issues, 71 Tex. B.J. 110 (2008).

Here is an excerpt from his article:
   

Many clients are wary of making large gifts because they believe their children will pay income tax on the gifts. While this is clearly not going to occur, clients who wish to make significant gifts in order to trigger the five-year look-back period do need to consider additional income taxes that may be paid by their children on the income earned by these gifted assets following the gifts. In most cases, the children are in a higher tax bracket than their parents. Over a number of years, the difference in the brackets can make a large difference in the overall tax paid by the family. Recent extensions in the look-back period from three to five years have given families incentive to make gifts earlier in an elderly client’s lifetime. This will only increase the potential negative income tax effect of these gifts.