Hi Terry, if ownership of an insurance policy valued at about $60K is transferred from a mother to a daughter and then ownership is transferred back (without cashing in or altering the policy in any way) in the same tax year (actually within 1 month within the same tax year) is it necessary for both mom and daughter to file separate Form 709’s for Gift Tax Returns or can it be it treated as a gift that was returned in tact? Also would either gift be subject to any Medicaid look backs? Thanks.
Terry Says: I’m going to ask you to consult an accountant here, because I do not believe (and I’m neither an attorney nor accountant) that this form would be required because you rescinded the “gift.” But that may depend on how the insurance company reports any transfer of ownership, and whether they issue any tax information to you — or merely treat it as a “clerical” issue.
IRS Form 709 deals primarily with estate issues, when gifting significant amounts of money that could be considered to impact the more than $5.43 million lifetime estate and gift tax exemption. That’s how the government “keeps track” of your lifetime gifts — but that typically only impacts those with larger estates. Of course, you are allowed to give $14,000 annually to any number of people and those gifts do not have to be reported on a gift tax return.
Medicaid now “looks back” at any transfers for five years. Each state sets its own “exclusions” such as prepaid funeral expenses, limited value of a life insurance policy, etc., for consideration in reclaiming assets from estates of people who have used state Medicaid funding for their custodial care. But since you now own the policy again — not sure why you did that — the brief transfer to your daughter would not have any impact on it being part of your “estate.” If you are the owner at the time you claim benefits, so it will be considered your asset.
It looks like you are trying to do some Medicaid “planning” in advance. You probably should have the advice of a qualified lawyer who practices elder law in your state. Go to www.NAELA.org — the National Association of Elder Law attorneys to search for one in your area.