Many of the clients we meet with have misinformation regarding gifting their property. When properly used, gifting can be a valuable estate planning tool, but one issue you need to be aware of when you are transferring your property is that there may be unintended consequences.
Some of the unintended consequences of improper gifting include:
- If you give property to an adult child, it could be at risk if that child is sued or files for bankruptcy.
- If you put money in your adult child’s name that they plan to hold on to for your future use, this could count against them if they need to apply for any financial assistance for their children or even for themselves.
- If you give property to your child, either cash or real estate, that property could be at risk if they later go through a divorce.
- If you give your property to a child, you may end up needing it for your care and be unable to access it when you need it.
- If you give real estate to a child, there may be negative tax consequences for them if the property is later sold.
- If you give money or property away and later need to apply for Medicaid, you may be ineligible due to your gifting, as Medicaid law allows a “lookback” period which allows them to review transfers, including sales and gifts, within the past 60 months.
What seems like a relatively simple transaction or even just a nice gesture can become a problem for both the giver and the recipient. There are many safe and appropriate ways to make gifting a part of your estate plan. Work with an estate planning attorney to make sure that your gift does not have unintended consequences.