Attorney says we need to gift some of Mom's money to each child. Has anyone done this? Don't you have to pay taxes as income on it?

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Mom's Attorney told us that we needed to pay each sibling a gift of about $10,000 of Mom's money. I do not understand why and if that happens wouldn't we have to pay taxes on it? I am on Medicare/Medi Cal because I am disabled and if I get that, I think I will lose my Medi Cal coverage won't I?

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I believe that only a cash deposit of $10,000 or more triggers the extra paperwork. If the money is deposited by check, the paperwork is not required. This happened to a friend of mine who found significant cash after the death of a parent.
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If you go to the bank with more than $9,999.99 you have extra Homeland Security paperwork to fill out. If you are on Medicaid or Welfare, yes it will affect your status. If you are filling out college aid applications, it will affect your status. He may be a lawyer, but he doesn't know squat about finance.
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The gift would not be taxed to the recipients, but if it exceeds $14,000 per person (in 2013), the giver would need to report the gift(s) with their tax return. The money would only be taxed if the total amount of lifetime gifts plus the amount of the estate exceeds the current estate tax exclusion. I believe that the exclusion is $5 million now, so this would not be an issue for most estates.

Follow jeannegibbs advice about the Medi Cal. Find out if there is a way that you could get some benefit from the gift by spending it on eligible expenses.
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I don't believe there will be tax involved, but, yes, it probably will impact your Medi Cal eligibility until it is spent down. I suggest that you contact the financial case worker who handles your case and ask about this, before your receive the money. Determine what kinds of things you could spend the money on to become eligible again.
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Contact an accountant. I am not sure what the limit now but parents are allowed to give their children x number of dollars a year as a gift without it being taxed. I think it use to be $15,000.00. I know nothing about Medicare/MediCal. Good luck.
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