2025 Estate Tax Changes
In my last blog post of 2024, I discuss changes to estate and gift taxes for 2025. As with Social Security and the Medicaid and VA programs which I have already detailed here in past weeks, inflation adjustments have changed some numbers applicable to estate and gift taxes. Estate tax is due on certain individual’s estates after they die. While New Jersey does not currently have an estate tax (we do still have an inheritance tax), federal estate tax still exists for estates over a certain size. For persons dying in 2025, only estates over $13,990,000 are subject to federal estate tax up from $13,610,000 in 2024. I should note that the current estate tax law is set to expire at the end of this year. Unless the incoming Congress and president agree to extend the law, when it “sunsets”, the old law will come back with the exemption cut in half. While many believe the law will, in fact, be extended, we should know for certain sometime before the end of next year. The annual gift tax exemption is also set to be bumped up. In 2024 one could gift up to $18,000 per person per year without either paying gift taxes or using a part of the
2025 VA Aid and Attendance Numbers
In this week’s post I will review the updated numbers for 2025 for the VA program that provides a benefit to wartime veterans and their spouses. Known as the VA Aid and Attendance program, this benefit provides a special pension to eligible applicants who need long term care. The maximum pension amount is tied to the same cost of living adjustment as Social Security, which for 2025 is 2.5 %. For a single veteran with no dependents the maximum pension one can receive goes up to $2358 per month. For a married veteran the maximum for 2024 will be $2795. For a widowed spouse who needs care the 2024 maximum will be $1515 per month. The Aid and Attendance program is a needs based benefit. This means that to be eligible one must meet a financial test. Different than Medicaid, the VA uses a net worth test. It calculates the applicant’s (in the case of a married couple both spouse’s) annual income and adds that to the countable assets. This is known as the net worth. For 2025 the net worth must be no more than $159,240 to qualify for this benefit. Existing VA A&A recipients should have received a letter from the VA informing them of the new amount they
2025 Medicaid Numbers
In a blog post in October, I updated you on some of the new Social Security and Medicare numbers for 2025. The recently announced cost of living adjustment (COLA) of 2.5% follows a 2024 increase of 3.2%. Many other federal programs are tied to the Social Security COLA. These include Medicaid and the VA Aid and Attendance programs. This week we will review the 2024 Medicaid numbers. Medicaid’s programs that cover long term care have a strict income cap or limit. For 2024 that number is $2901 per month. Anyone with more than $2901 per month of gross income (before taxes and Medicare and health insurance premiums are deducted) must use a Qualified Income Trust in order to qualify for Medicaid. Medicaid recipients must also have less than $2000 of countable assets. A home is an exempt asset up to a certain limit as long as the applicant is living in it. In 2025 the limit is $1,097,000 of equity. Anything above that amount is countable. For a married couple where at least one of the spouses is living in the home there remains no limit. In other words, the home is exempt in that case no matter the value. In the case of a married couple where only one spouse is applying for Medicaid,
Real Estate and Medicaid (Part 3)
In this third post of three, I discuss the impediment to qualifying for Medicaid when an applicant owns two homes. To review, only the primary residence is an exempt asset as long as the applicant or spouse is living in it. The second home is countable towards Medicaid’s asset limit. Selling the home and spending down the proceeds is obviously one option, however, if the desire is to keep that home in the family there are other options. Last week I explained that the equity from the second home can be converted to cash by borrowing against it and taking a mortgage. The cash then must be spent down. In the case of a married couple, the non-Medicaid spouse can then purchase a Medicaid compliant annuity which converts this cash to income under Medicaid rules. The spouse then receives monthly payments from the annuity that can be used to make the mortgage payments. In the case of a single applicant it is a bit more complicated but some part of the cash would be transferred and the rest used to purchase the annuity. In that case, the transferred cash would be used to pay the mortgage. This week I discuss a second option. This solution involves selling the second home or a
Real Estate and Medicaid (Part 2)
In my blog post last week, I addressed a common question about Medicaid when someone owns two homes. “Knowing that there is an asset limit in order to qualify for Medicaid but there are also certain exempt assets, can I exempt both homes and still qualify for benefits?” The answer is no, but that doesn’t necessarily mean you can’t keep both homes. The primary residence is considered an exempt asset. The second home is countable. For a single applicant assets must be below $2000 and for a married couple the non Medicaid spouse can keep 1/2 of the countable assets up to a limit of $154,140 (for 2024). Selling the second home and spending down the proceeds is one solution but not the only one. As I said, there may be a way to keep the second home. There are a couple of options. One is to borrow enough money against the equity of the home so that the remaining equity plus other countable assets drop the asset total below Medicaid’s allowable limit. The borrowed funds then need to be spent down. Paying down other debt is one way to do that if there is other debt, such as a mortgage on the primary residence or credit card balances. Another is to
Real Estate and Medicaid – Part 1
As I have written about many times on this blog, Medicaid is a needs based benefit. Assets must be spent down below $2000. Not every asset, however, is countable. There are exempt or non countable assets. These are assets that do not count against the $2000 limit. Additionally, in the case of married couple the non Medicaid spouse can keep as much as $154,140 in countable assets. The primary residence is the biggest exempt asset as long as the Medicaid recipient or the spouse is living in it. A number of people calling our office about Medicaid express a common concern. If they own more than one property, can they exempt all their real estate? The answer to that question is “no”. Only the primary residence is exempt and in the case of a single applicant the exemption has a limit of just over $1,000,000. For a married couple there is no value limit to the exemption for the primary residence. So, must the other homes be sold and spent down in order to achieve Medicaid eligibility? Not necessarily. There may be other options that will allow families to keep the other properties. I’ll discuss what I mean next week.