Main Menu
Maximizing Estate Tax Planning Through Unlimited, Direct Gifts of Medical Expenses
Posted in Estate Planning

One of the most basic and important estate tax planning tools is making the most of “exclusions.” While many individuals are already aware and take advantage of the tax planning benefits of the “annual exclusion,” less are aware of another valuable exclusion: a qualified gift of medical expenses.

What are exclusions?

Exclusions are gifts that are not taxable, nor charged against the donor’s lifetime use of the exemption amount. This year’s federal gift tax law retained the annual exclusion, which has been set at $14,000 for 2013. This means that one may gift up to $14,000 to as many individuals as desired – children, grandchildren, spouses of relatives, and even unrelated third parties – without triggering any gift tax, using up any of the lifetime exemption, or even needing to file a gift tax return.

A “qualified gift of medical expenses” means that, in addition to, or instead of, making annual exclusion gifts, the donor can pay for the medical expenses of the donee(s).

The fine print

Qualified gifts of medical expenses must be made by the donor directly to the medical provider. The donor’s payment of medical insurance premiums on behalf of the donee qualifies for the exclusion. Reimbursements of medical bills that have already been paid do not qualify, nor do payments to providers which will ultimately be covered and reimbursed by insurance.

In addition, the nature of the medical expenses must be “qualified,” but this generally includes payments to doctors, dentists, psychologists, hospitals, inpatient alcohol/drug treatment, prescription medications, prescription contact lenses and eyeglasses, etc. Most cosmetic surgery and over-the-counter medicines do not qualify. Any contemplated gifts for medical care should be discussed in advance with a tax planner to determine qualification.

A qualified gift of medical expenses is an important but often underutilized estate planning tool that not only reduces estate taxes, but in the process can substantially improve the health care of the recipient of the gift.


clientuploads/Publications/Blog and Article Photos/Download the Guide (Estate Planning).png


 

  • Partner

    Greg works with estate and wealth transfer and matrimonial law in the firm's Estate Planning Department and is also part of the Corporate Services Department. Among the legal services he provides for his clients are estate and gift ...

  • Partner

    Mike is a partner in Bingham Greenebaum Doll LLP’s Estate Planning Department. The Estate Planning Department seamlessly coordinates and executes a wide array of legal services that cater to the unique needs of high ...

RSS RSS Feed

Subscribe

Recent Posts

Categories

Contributors

Archives

Back to Page