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Can children pay parent's assisted living and not incur gift tax?

My 92 and 89-year-old parents have recently been put into assisted living by their children in GA as their needs became overwhelming. We used monies from their reverse mortgage for their care, but those funds are now exhausted. Their income is approximately 4K, thanks to SS and VA benefits. Their children are currently donating over 6K to supplement their income to pay for assisted living, medical/prescription bills, insurance, etc. A few will be donating over 10K a year. How do we avoid gift tax for those contributions? Is it financially reasonable to set up a non-profit - 5013c - in order to avoid gift taxes and perhaps give the children a tax deduction on their contributions? Contacted an elder law firm but said I need a tax accountant, however concerned about that cost as well. First time navigating this situation, but certain others have gone down this road. Any suggestions would be greately appreciated!
Status: Open    Nov 10, 2015 - 02:47 PM

Elder Law, Finance

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Expert Answers

Nov 11, 2015 - 09:32 AM

You need to consult with a CPA for guidance but here is an overview for you:
First, you can "gift" $14,000 per person, per year, without any gift tax issues at all. This means that each child could contribute $28,000 per couple without concern. But more importantly, if they are paying their bills directly, there is no such limitation at all.
Second, a person can "gift" up to $5.43 million over their lifetime without gift taxes being paid, so I think you are fine there too.

Any CPA will do, not necessarily a specialist in Tax. But that is the big picture.

Nov 11, 2015 - 10:50 AM

There is no gift tax limit on gifts made for medical purposes. And, the gift tax limit for other gifts is $14,000 per person per year. So you and your spouse can give $28,000 to each of your parents with no tax consequences even if their care does not qualify as medical.


Apr 09, 2016 - 05:18 AM

Why not Medicaid ?
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