The Tax Implications of Gifting Your Assets

At The Lansky Law Firm, many clients ask whether they can simply give money or property to children, grandchildren, or other loved ones without creating tax consequences.

While gifting can be a valuable estate planning strategy, the rules surrounding gifts are often misunderstood. Understanding the differences between annual gift tax exclusions, lifetime gift and estate tax exemptions, and Medicaid planning rules is essential before making significant transfers of wealth.

A well-planned gifting strategy can help preserve family wealth and support future generations. However, an improperly structured gift can create unintended tax consequences or Medicaid eligibility issues.

Understanding the Annual Gift Tax Exclusion

One of the most commonly used gifting strategies is the annual gift tax exclusion.

In 2026, individuals may gift up to $19,000 per recipient per year without filing a gift tax return or utilizing any portion of their lifetime gift and estate tax exemption.

Married couples can combine their exclusions and gift up to $38,000 per recipient annually.

For example, a married couple with three children could transfer up to $114,000 each year without reducing their lifetime exemption.

This strategy can be an effective way to gradually transfer wealth to family members while potentially reducing the size of a taxable estate over time.

At The Lansky Law Firm, we frequently help families evaluate whether annual gifting strategies align with their overall estate planning goals.

Understanding the Lifetime Gift and Estate Tax Exemption

Many people mistakenly believe that exceeding the annual gift exclusion automatically results in gift tax.

In reality, gifts exceeding the annual exclusion amount generally reduce a person's lifetime gift and estate tax exemption before any gift tax becomes due.

Current federal exemption amounts remain historically high. In 2026, the federal exemption is approximately:

• $15 million per individual

• $30 million for married couples

For most families, this means that a gift exceeding the annual exclusion simply requires filing a gift tax return and reduces a portion of the available exemption.

For example, if you gift $119,000 to a child in 2026:

• The first $19,000 qualifies under the annual exclusion

• The remaining $100,000 reduces your available lifetime exemption

• No immediate gift tax would typically be due

Understanding how these rules apply to your situation is an important part of comprehensive estate planning.

Why Estate Tax Planning and Medicaid Planning Are Different

One of the most important misconceptions we address at The Lansky Law Firm is the belief that gifting strategies for estate tax purposes and Medicaid planning purposes are the same.

They are not.

For estate tax planning, gifting can be an effective strategy for removing assets from your taxable estate. For Medicaid planning, however, gifts may create significant complications.

When someone applies for long-term care Medicaid, certain transfers made during the five-year look- back period are reviewed by Medicaid administrators.

Gifts made during that period may result in a penalty period during which the applicant becomes ineligible for Medicaid benefits.

This means a gift that is perfectly acceptable from a tax perspective could create substantial Medicaid planning problems if long-term care becomes necessary within the following five years.

For example:

A parent gifts $50,000 to a child.

From an estate tax perspective, the gift may simply reduce the parent's available lifetime exemption.

From a Medicaid perspective, however, that same gift could trigger a period of Medicaid ineligibility if nursing home care is needed within the five-year look-back period.

The tax rules and Medicaid rules operate independently of one another. Satisfying one set of rules does not automatically satisfy the other.

At The Lansky Law Firm, we regularly help families understand how gifting decisions may impact both tax planning and future Medicaid eligibility.

The Importance of Strategic Gifting

Before making substantial gifts, it is important to evaluate how those transfers fit into your overall financial and estate planning objectives.

Questions to consider include:

• Will this gift affect my future financial security?

• Could I require long-term care in the future?

• Are there income tax consequences associated with transferring this asset?

• Would a trust-based strategy provide greater protection?

• How will this gift impact my overall estate plan?

A thoughtfully designed gifting strategy can help preserve family wealth and accomplish important personal objectives. However, making gifts without considering the broader implications can create unintended consequences that may be difficult to reverse.

The attorneys at The Lansky Law Firm work closely with families to develop estate planning and Medicaid planning strategies designed to protect assets while supporting long-term goals.

Contact The Lansky Law Firm

Before making significant gifts, it is important to understand both the tax implications and the potential impact on future Medicaid eligibility.

If you would like guidance on developing a gifting strategy that aligns with your estate planning goals, contact The Lansky Law Firm today.

The Lansky Law Firm

6800 Poplar Ave #225

Memphis, TN 38138

Call (901) 767-7006 or visit www.lanskylawfirm.com to learn more or schedule a consultation.