We have highlighted the inheritance planning strategy of gift giving previously, but there is an exemption that is often overlooked that we would like to look at today. To provide some context the purpose of giving gifts from an estate planning perspective is to reduce the value of your estate in an effort to limit or eliminate your heirs’ estate tax exposure. On a personal level, when you give those who would be receiving inheritances from the estate gifts while you are still alive you get to enjoy the exchange and it is a totally positive experience for all concerned.
Of course there is a gift tax that comes in at a rate that mirrors the estate tax, but there are exemptions that you can utilize. The one we want to take a look at here is the tax-free medical gift. Each individual can pay the medical expenses of an unlimited number of people without incurring any gift tax responsibility. This includes necessary health care treatments and not elective measures like cosmetic surgery. It should be noted that the high cost of nursing homes and assisted living facilities are a cause for concern in elder laws circles, and these can be mitigated through tax-free medical gift giving depending on the circumstances.
Paying the bills when someone that you care about becomes ill is one way to take advantage of this gift tax exemption, but you can also pay for the health insurance of as many people as you want to regardless of the total cost. This includes some forms of long-term care insurance as well, so you can really provide your loved ones with quite a safety net if you choose to give them medical gifts. Aside from the insurance and perhaps paying for the long-term care of a loved one it is hard to have a hard and fast health care gift plan in place, but it is something to keep in mind should you find that a family member is in need of medical assistance.