I am 79 years old and in relatively good health. My goal is to save as much of my hard earned money for my loved ones as I possibly can in the event i need long term care or I need to enter a nursing home. Therefore, I would like to transfer some shares of common stock that I own into my son’s name. The approximate value of the stock today is $ 13,000.00. When I file income tax, will I need to pay profit on the common stock because of the transfer? Do i need to file a federal gift tax return because of the gift? Does my son need to report this gift on his income tax return?
One can transfer up to $14,000 on an annual basis to as many people as they desire. Transferring more than that amount requires the filing with the Internal Revenue Service of a Federal Gift Tax form. The person receiving the gift (your son) does not include the gift in his tax return as it is not considered taxable income for him. If you’re transferring stock, your son takes it at the same price you paid for it (“cost basis”) and he may have to pay capital gains taxes when he sells it.
It is also very important to realize that making a gift like the one described here of any amount could make you ineligible for some period of time (“penalty period) for Medicaid if you ran out of assets and required long-term care. This would apply if the gift were made within five years of your applying for such assistance.
Thus, we would strongly encourage you to meet with an elder law attorney to review your entire financial situation and your long term goals in order to design a proper plan to address your concerns.