When planning your estate in Michigan, it’s important to consider how to minimize the impact of estate taxes on your assets. One strategy to mitigate estate taxes is gifting assets. Early gifting can potentially reduce your estate’s size, leading to lower taxes and Probate costs. Please continue reading as we explore the benefits of this approach and how a dedicated Washtenaw County Estate Planning Attorney can help shape your future.
What Constitutes a Gift?
The Internal Revenue Service (IRS) defines a “gift” as anything an individual gives away without receiving something of similar value in return. It’s important to note that this includes money, property, or items that you give to friends and family members, as well as donations to charities.
You should note that Michigan does not impose a gift tax. However, the federal gift tax exemption is $19,000 per recipient per year as of 2025 and $18,000 in 2024. If you are married the amount will be increased to $38,000 per beneficiary. This means if you gift more than this amount in a year to any single person, the amount over the exemption will count against your lifetime gift tax exemption of $13.99 million for 2025. If you are married, this amount will increase to $27.98 million.
Why Should I Consider Gifting Assets?
Gifting assets before death offers numerous benefits. One of the primary reasons people choose to gift assets to their loved ones before death is to mitigate potential estate taxes. In 2025, the federal estate tax threshold is set at $13.99 million. If an individual’s estate exceeds this value upon their passing, it becomes subject to federal estate taxes. However, by strategically implementing qualified transfers of assets during their lifetime, they can proactively reduce the overall value of their estate, potentially avoiding these taxes altogether.
Beyond mitigating estate taxes, gifting assets can play a crucial role in Medicaid planning, particularly for those who foresee the potential need for long-term care in the future. Medicaid offers financial assistance to those with limited income and resources. However, it’s essential to recognize that Medicaid is a need-based program with stringent eligibility requirements. In most cases, individuals with assets exceeding $2,00 don’t qualify for coverage.
To meet Medicaid eligibility requirements, you may need to consider a strategy known as “spending down” assets. This involves reducing the total value of your estate. Gifting assets to loved ones can help you achieve this. It’s crucial to be mindful of the Medicaid “look-back” period which is typically five years. It scrutinizes any asset transfers made within that timeframe before a Medicaid application. If any transfers are deemed to have been made with the intent of qualifying for this program, you could be penalized, potentially delaying or even disqualifying you from receiving benefits.
As you can see, gifting assets can help you achieve your estate planning goals. At Collis, Griffor, & Hendra, we are prepared to help you explore your legal options and ensure you mak sound decisions about your future. Connect with our firm today for more information.
