Basics of Gifting, Gifts Rider, and Asset Protection in New York
This article is not intended to provide you with legal advice. Should you seek legal advice, please consult an attorney. KTS would gladly recommend an attorney should you need one. It’s important to have an attorney take appropriate actions on your behalf and to avoid issues that may be discussed in this article.
October 2022 New York Gifts Rider Update: The Statutory Gifts Rider (a separate form previously required with the execution of power of attorney) is no longer required in the state of New York for a power of attorney executed on or after June 13, 2021. In addition, gifting options have been expanded in the power of attorney modifications section allowing for greater gifting amounts and other changes that apply under this new regulation. These changes represent important information for estate planning, future Medicaid, and tax planning. If you are in doubt about your existing or future power of attorney, you should consult an attorney for details.
Protecting your assets requires a strategy and a plan to prepare if and when your current situation changes. One lesser-known part of an asset protection plan is the gifts rider. The gifts rider plays an important role in the ability to transfer your home and other assets that a power of attorney alone does not cover.
What may be a surprise to some, is that this gifting power is more than what is traditionally thought of as gifting. For example, an agent uses a gift rider when they want to transfer assets out of the principal’s name. Of course, if you are the principal, you should use caution in selecting an agent acting on behalf of you, and make it a point to understand the ramifications of gifts riders and gifting relating to your financial situation.
NY Law and Statutory Gifts Rider
A Statutory Gifts Rider (SGR) modifies a power of attorney to allow agents gift-giving power and can be helpful for Estate and Medicaid tax planning. Previously, in New York, the SGR allowed agents to give gifts in excess of $500 and was executed by a required Statutory Gifts Rider Form (SGR Form) along with actual Power of Attorney forms.
In New York, however, recent legislative changes eliminated this statutory gifts rider. Deemed confusing in the power of attorney process, the government no longer requires the Statutory Gifts Rider (SGR). The SGR was an optional and separate form used by the principal to allow the agent the authority to act to give unlimited gifts from their assets.
Under the new legislation, GOB § 5-1514, which became effective June 2021, the prior documents, NY Statutory Short Form power of attorney and Statutory Gifts Rider, were consolidated into one comprehensive document.
This new law brought significant changes to the New York Power of Attorney, “certain gift transactions; formal requirements; and statutory form.” With this change, the principal’s agent can now gift an amount up to $5,000 per year without having to get the principal’s permission to do so.
In other words, an agent is allowed general unauthorized gifting up to $5,000 annually with one single document that authorizes gift giving in the State of New York. This results in a simpler POA form and provides better coordination with other organizations.
For an amount over $5,000 that a principal wants gifted, additional gifting powers can be granted to the agent. To do this, the additional gifting powers would be granted via the actual power of attorney modification section without having to use the Statutory Gift Rider form.
Gifting and Tax Planning
Gifting is taxable by the IRS, which allows a taxpayer, in 2022, a maximum gift of $16,000 per year to one individual with no limit to how many recipients you choose to gift. If you are married, you and your spouse could each gift up to a maximum of $16,000 annually per recipient without having to pay a gift tax.
It may be wise to note that this maximum annual gift exclusion ($16,000) per recipient may be adjusted in 2023 due to inflation. In addition, as of 2022, the IRS allows a lifetime gifting amount of $12.06 million, which in 2021 was increased from $11.7 million.
In New York state, there is no gift tax but any taxable gifts to beneficiaries that are made within 3 years of death will be subject to NY estate tax laws. The value of gifts within that “clawback” time will be included in the deceased’s estate.
Protecting Assets and Medicaid.
If you are elderly and concerned about medical issues in the future and the need for nursing home care or seeking to qualify for Medicaid, the concept of gifting your home and assets may not be the right choice. Doing so, for example, may be subject to the Lookback law in New York and you could be penalized if you did not receive a fair market value for your “gifts.”
Long-term care insurance and other options, like Medicaid asset protection trusts, may likely be a better option if a nursing home or home care is in your future. Of course, we don’t all have that infamous “crystal ball” to let us see where we are headed. That’s why planning well in advance to protect your assets is a wise decision rather than waiting for a crisis. You may want to check with your attorney regarding your own situation.
Your bottom line…
The concept of gifting and protecting your assets can be complicated. There are many factors including the state you live in, your age, and taxes that can help you decide what’s best for you and your circumstances. Consult with an attorney for the best options that may be available to you.
About the author, Carlos Nath:
Carlos Nath is the Senior Trust Advisor with KTS Pooled Trust. As a seasoned professional with over four years of experience in the New York pooled trust space, Carlos has helped thousands to enroll and set up their accounts with KTS. He is proficient in understanding the Medicare process and provides assistance in clarifying what clients may need. Previously, Carlos worked with a Medicaid consulting firm as an advisor who helped clients who were seeking Medicaid assistance.