In advising clients, we are often confronted with the conundrum of what we don't know, and what happens if what we are trying to achieve, is thwarted by subsequent events. Gifts to minors under the Uniform Gift to Minors Act can have unintended consequences and large expense to the grandparent, if the gift is done without the advice of someone who knows the laws of Medicaid and Elder Law consequences. In this regard, many times clients come to us professionals and say I want to do this, a gift to grandchildren for their college or other education expenses when they reach 21. As professionals, it is incumbent on us to know and to advise them of the wisdom of what they want to do, but also what are the consequences of what the client wants to do in the event of circumstances that we as professionals know might very well happen, e.g., long term ill health or declining health of elderly clients. A simple example is a grand parent wants to set funds for college for a grandchild, but does not want a lot of formality or the advice of an "expensive" lawyer who will only make things difficult for the grandparent and the stock broker. Many times the answer that is unknowingly suggested is the Uniform Gift to Minors Act.
Under that act and the Federal Gift Tax Laws, a grandparent can create a tax free ($13,000.00 per year in 2011) account for each grandchild that pays to that grandchild the funds gifted plus the appreciation and income in that account when the minor reaches age 21 (F.S.§710.105). BUT the downside is that if the grandparent needs to go into a nursing home within 5 years of that gift, the well meaning gift can prevent the grandparent from being eligible for Medicaid. Recently, I had a case where the grandparent gave $30,000.00, $10,000,00 each, to three (3) grandkids. The problem is that such a transfer may not be amenable to normal reversing techniques. As a result, three years later, even though we could otherwise make the grandparent eligible for Medicaid, we might experience a 6 month penalty of ineligibility, that resulted in the grandparent's loss of 6 months nursing home payments at $8,500.00, per month or $51,000.00 loss of assets. With proper advice this would not have happened. Unthinking use of the Uniform Gift to Minors Act can be disastrous especially when the client says, "Why didn't you tell me of this?"
MORAL of the story is that gifts under the UGMA act of Florida are not a good idea if the donor is over 55 years old. Call Mark R. Lewis, PA and we can tell you a better way.
