Each year, certain numbers that are relevant for estate and elder law planning are updated and released. Here are a few of the important numbers to be aware of for 2021.

Estate Planning

The estate and gift tax exemption for 2021 is now $11.7 million per individual, up from $11.58 million in 2020. This means an individual could transfer $11.7 million and pay no federal estate or gift tax, while a married couple could together transfer $23.4 million. 

The $23.4 million exemption is not necessarily automatic. If the first spouse to die does not use the full exemption amount available, the surviving spouse may use the unused exemption if “portability” is elected on the estate tax return of the first spouse to die. To secure portability, an estate tax return must be filed, even if no tax is due.

The annual gift exclusion amount for 2021 remains at $15,000. The annual gift tax exclusion allows you to give away $15,000 to as many individuals—your kids, grandkids, their spouses, total strangers—as you’d like with no federal gift tax consequences. Together, a married couple can each make $15,000 gifts to the same individual, doubling the impact. Remaining unchanged, you can make unlimited direct payments for medical and tuition expenses.

For those who face exposure to taxes even with these exemption amounts, advanced planning techniques should be considered, such as spousal lifetime asset trusts (SLATs), grantor-retained annuity trusts (GRATs), and installment sales to grantor trusts, where you give away the potential growth of assets transferred to the trust tax-free.

It should be noted that President Biden has proposed restoring estate and gift taxes to their 2009 level: $3.5 million per person for the estate tax, $1 million for the gift tax, and a top rate of 45%, which is now 40%. Planning put in place before these proposed changes can result in significant estate and gift tax savings.

Medicaid Planning

Important numbers for Medicaid planning are set by both federal and state law. The following are significant numbers for planning in the State of Michigan.

Assets

The Individual Resource Allowance, the maximum amount of assets that a nursing home patient may have when qualifying for Medicaid benefits, remains at $2,000. The Resource Allowance for a married couple where both are seeking Medicaid benefits is $3,000.

The Divestment Penalty Divisor for 2021 is $9,560. This number is used to calculate the penalty period for divestments, transfers for less than fair market value to someone other than a spouse, within the five-year lookback period. For example, divestments of $50,000 would result in a penalty period of 5.23 months, during which time the Medicaid applicant would not qualify for benefits. (50,000 divided by 9,560, equaling 5.23.)

Income

The Personal Needs Allowance, the amount of a nursing home resident’s income that he or she may keep and not be applied towards the cost of care, remains at $60 a month.

Spousal Impoverishment Standards

While the nursing home spouse may have no more than $2,000 of assets, the community spouse, the spouse not needing nursing home care, may keep a portion of the countable assets. For 2021, the Minimum Community Spouse Resource Allowance is $26,076, and the Maximum Community Spouse Resource Allowance is $130,380. Note, the general rule is that the community spouse may protect and keep one-half of the countable assets, subject to the minimum and maximum levels set each year by law.

If the community spouse does not have enough monthly income to meet his or her basic needs, income of the nursing home spouse may be used by the community spouse, rather than going towards the cost of care of the nursing home spouse. For 2021, the Minimum Monthly Maintenance Needs Allowance is $2,155.00 and Maximum Monthly Maintenance Needs Allowance is $3,259.50.

We’re Here to Help

We have the knowledge, experience, and expertise to help you navigate these important numbers and their impact on your estate or elder law planning. Call us today, or schedule an appointment online, and let us help you with your planning needs.