Many people speak to us about gifting and transferring assets toprotect them from spending on nursing home care. Frequently, they believe that gifted assets will be immediately exempt from PA Inheritance Tax. That is not correct. In Pennsylvania, a gift in excess of $3,000 must be made at least one (1) year before the date of death to be exempt from the PA Inheritance Tax. There is a $3000 immediate exemption per person gifted per calendar year in the 12 months before death. Any amount in excess of that will be taxed for PA Inheritance Tax purposes as though it had not been gifted.
When we prepare a Medicaid Asset Protection plan for a client, we make sure they understand that they can only expect the full PA Inheritance Tax benefit after one year has passed from the date of the gift. Some clients choose to have assets gifted to an Income Only Medicaid Asset Protection Trust so that highly appreciated assets will still be included and taxed in their estate. They will typically want beneficiaries to get the step up in capital gains tax basis. That option will be discussed more fully at a later date but will clearly eliminate the PA Inheritance Tax Exemption even if one (1) year passes.
For questions or to review Elder Law and Estate Planning opportunities please contact Douglas Kaune, Esq. at 610 933 8069 or at Dkaune@utbf.com.
Doug is a member of the National Academy of Elder Law Attorneys (NAELA) and a Partner with Unruh, Turner, Burke & Frees, P.C. which is a full service law firm with offices located in Malvern, Phoenixville and West Chester, PA and also serving clients in the counties of Chester, Montgomery, Delaware, Bucks, Berks and Philadelphia.