When Can Spouses Make Gifts to Each Other without Causing a MassHealth or Federal Gift Tax Problem?

by:   Brian E. Barreira, Esq.

Under federal Medicaid law and MassHealth regulations, spouses have the right to transfer assets to each other at any time without causing a period of ineligibility from MassHealth. The purpose of the gift is not scrutinized by MassHealth, and the 5-year lookback period does not apply to possibly cause a MassHealth disqualification period. Gifts between spouses can even occur after a nursing home stay has begun and after a MassHealth application has been filed. If one spouse is not a United States citizen, however, a federal gift tax problem can arise.

For federal gift tax purposes, spouses who are both United States citizens can make gifts of any amount to each other at any time without causing any gift tax issue, and without even causing any need to file a federal gift tax return. Gifts to a spouse who is not a United States citizen, however, are limited by federal tax law to $143,000 in 2013, and any gift above that amount would require the filing of a federal gift tax return. For most married couples, however, exceeding that amount would not pose any tax problem, since any gift in excess of $143,000 would not cause an immediate tax; rather, the amount of the gift in excess of $143,000 would merely use up some of the gift-giving spouse’s federal estate and gift tax exemption, which is $5,250,000 in 2013.

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Comments

  • jackat  On October 24, 2013 at 12:09 pm

    Brian, Sometime could you do an article on how to name beneficiaries/owners of bank accounts, life insurance, 401k’s. company retirement plans, etc when a couple has a testamentary trust in place. Thanks, Tom

  • Marina  On April 1, 2014 at 6:37 pm

    As we’re on At-Home Spouses Should Obtain Legal Advice When Applying for MassHealth to Cover Nursing Home Costs for Their Spouses Massachusetts Client Alerts, Remember that if you are selecting a heatlh care facility or care method for a loved one, you need to be realistic. It can be hard to accurately view the heatlh needs of a parent or relative since you want to think they are capable and in good heatlh. But ignoring the needs of certain medical conditions, whether the wandering tendencies of an Alzheimer’s patient or the tremors of a person with Parkinson’s can actually do them harm.

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    When Can Spouses Make Gifts to Each Other without Causing a MassHealth or Federal Gift Tax Problem? | MassHealth: Medicaid in Massachusetts

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