The Gift Rule

Making Gifts: The $16,000 Rule

One simple way you can reduce estate taxes or shelter assets in order to achieve Medicaid eligibility is to give some or all of your estate to your children (or anyone else) during their lives in the form of gifts. Certain rules apply, however. There is no actual limit on how much you may give during your lifetime. But if you give any individual more than$16,000 in 2022, you must file a gift tax return reporting the gift to the IRS. Also, the amount above $16,000 will be counted against a lifetime tax exclusion for gifts. This exclusion was $1 million for many years but is now $12.06 (in 2022). Each dollar of gift above that threshold reduces the amount that can be transferred tax-free in your estate.

The $16,000 figure is an exclusion from the gift tax reporting requirement. You may give $16,000 to each of your children, their spouses, and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS. In addition, if you’re married, your spouse can duplicate these gifts. For example, a married couple with four children could give away up to $128,000 to their children).

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David Wingate is an estate planning and elder law attorney at Estate and Elder Planning by David Wingate. The Estate and Elder Planning office services clients with powers of attorneys, living wills, Wills, Trusts, Medicaid and asset protection. The Elder Law office has locations in Frederick, Washington and Montgomery Counties, Maryland.

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