Ethan R. Okura
Hawai‘i Herald Columnist

Happy New Year! Here is the 2017 update of important numbers used in estate and Medicaid planning in Hawai‘i.

• How much money and property can a person have at death without having to pay estate taxes?

At the end of 2012, Congress passed a law making the exemption from estate taxes $5 million (adjusted for inflation) with no built-in expiration date. Taking into account inflation, the actual amount exempt from estate tax for 2017 is $5,490,000. The Hawai‘i estate tax law was previously amended to follow the federal estate tax law, so there is also a $5,490,000 exemption from Hawai‘i estate tax. (In other words, if you pass away in 2017 with less than $5,490,000, and you didn’t already use up any of your exemption by making gifts during your life, you will not owe any federal or Hawai‘i state estate tax.)

How much can a person give away without paying a gift tax?

As in 2016, you can give $14,000 to each person this year without having to report it to the IRS. You can give any amount to a husband or wife who is a U.S. citizen without reporting it to the Internal Revenue Service. If you give more than $14,000 to any person in one year, the amount over $14,000 is a “taxable gift.” You are supposed to file a gift tax return to report the gift. For 2017, you can give up to $5,490,000 of taxable gifts using up your lifetime exemption and still not pay any gift tax. This opens up many opportunities for the wealthy to give away assets without being taxed or to protect assets from creditors. If you give away assets, there will probably be a Medicaid penalty if you need nursing home care. Do not give away assets — not even your home or $14,000 per person — without first seeking expert advice about the effect of both gift tax laws and Medicaid laws.

How much in assets can a husband and wife have and still qualify for Medicaid to pay nursing home costs for one of them?

A husband and wife, together, can have $122,900 in assets and still have Medicaid pay for the nursing home costs for one of them. (The amount is the same as last year’s.) This $122,900 is in addition to the following exempt assets, which the government will not count: necessities such as clothing, furniture and appliances; motor vehicles; funeral or burial plans and a burial plot for each family member; one wedding ring and one engagement ring; and up to $840,000 of equity in a home.

If a person is not married, or if both husband and wife need nursing home help, how much in assets can each have and still qualify for Medicaid for nursing home costs?

A single person can have $2,000. A married couple can each have $2,000.

If you give away assets to your children, how long do you have to wait before you can qualify for Medicaid for nursing home costs without a penalty?

The answer is five years. However, this does not mean that you have to wait five years before getting Medicaid help. There are ways to reduce or eliminate the penalty period even before five years has passed. We can help families save their remaining money and/or the value of their home from nursing home costs and Medicaid liens without spending down everything — even at the last minute as the client is going into a nursing home without having planned ahead financially.

• If a person qualifies for Medicaid for nursing home costs, how much of the family income can the spouse keep?

The spouse who is not in the nursing home (referred to as the “community spouse”) can keep all of his or her own income, including Social Security checks, pension checks, etc. If the income of the community spouse is less than $3,022.50 per month, the community spouse can also be given some of the income of the spouse in the nursing home to bring the community spouse’s income up to $3,022.50. The one who is in the nursing home has to use the rest of his or her income towards nursing home costs, except for $50 a month, which can be kept.

• When is probate necessary?

In Hawai‘i, probate is necessary if a person dies with real estate of any value or other assets worth over $100,000 that are not in a revocable living trust, not in joint names with right of survivorship and do not name a beneficiary.

Honolulu Office (808) 593-8885
Hilo Office (808) 935-3344

Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and creditors.

This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)

This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.

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