2013 Estate Planning Update (February 2013)



Ethan R. Okura

            Here is a 2013 update on important numbers used in Estate Planning and Medicaid Planning in Hawaii.

How much money and property can a person have at death without paying estate taxes?

As I mentioned in last month’s article, $5,000,000 (adjusted for inflation) is estate tax free permanently starting this year. The IRS Revenue Procedure 2013-15 clarified that taking into account inflation, the actual amount exempt from estate tax for 2013 is $5,250,000. The Hawaii Estate Tax law was amended to follow the Federal Estate Tax law so there is also a $5,250,000 exemption from Hawaii estate tax. (In other words, if you pass away in 2013 with less than $5,250,000, you will not owe any Federal or Hawaii State Estate Tax ).

How much can a person give away without paying a gift tax?  You can give $14,000 each year to each person without having to report it to the IRS.  You can give any amount to a husband or wife who is a U.S. citizen without reporting to the IRS.  If you give more than $14,000 to any person in one year, then the amount over $14,000 is a “taxable gift.”  You have to file a gift tax return to report the gift, but for 2013, you can give up to $5,250,000 of taxable gifts in your lifetime without paying a gift tax.  For the wealthy, this opens up a lot of opportunities to give assets without tax or to protect assets from creditors.  If you give assets away, there will probably be a Medicaid penalty if you need nursing home care.  Do not give away assets (not even your home) without expert advice about the effect of both gift tax laws and Medicaid laws.

How much in assets can a husband and wife have and still qualify for Medicaid to pay nursing home costs for one of them?  A husband and wife together can have $117,920 in assets and still have Medicaid pay for the nursing home costs for one of them. (The amount was $111,640 last year.) This $117,920 is in addition to the following exempt assets, which the government will not count:  Necessities such as clothing, furniture and appliances; motor vehicles; funeral or burial plans; one burial plot for each family member; one wedding ring and one engagement ring, and up to $802,000 of equity in a home. (The equity limit was $786,000 last year.)

If a person is not married, or if both husband and wife need nursing home help, how much in assets can each have and still qualify for Medicaid for nursing home costs?  A single person can have $2,000; a married couple can have $4,000.

If you give away assets to your children, how long do you have to wait before you can qualify for Medicaid for nursing home costs without a penalty?  The answer is 5 years.    However, this does not mean that you have to wait 5 years before getting Medicaid help.  There are ways to reduce or eliminate the penalty period.

If a person qualifies for Medicaid for nursing home costs, how much of the family income can the spouse keep?  The spouse who is not in the nursing home (“community spouse”) can keep all of his or her own income (social security checks, pension checks, etc.).  If the income of the community spouse is less than $2,898 per month, the community spouse can also be given some of the income of the one in the nursing home to bring the community spouse’s income up to $2,898.  The one who is in the nursing home has to use the rest of his or her income towards nursing home costs, except for $50 a month, which can be kept.

When is a probate necessary?  Probate is necessary in Hawaii if a person dies with real estate of any value, or other assets worth over $100,000, which are not in a revocable living trust, not in joint names with right of survivorship, and do not name a beneficiary.


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