The federal gift tax is a tax on the giver of a gift, not the recipient, but it only applies once the donor has made more than $5.6 million dollars worth of taxable gifts during his or her lifetime.  (This figure increases to $11.2 million if you opt to give as a couple.) So, if your total taxable income is not worth more than $5.6 million, and if you don't expect to give away that amount over your lifetime, then in all likelihood the gift tax will never apply to you.  

Actually, the $15,000 limit that you often hear about is the annual exclusion amount that a donor can give to any one person during the calendar year without having to file a gift tax return declaring the gift.  Since you don't have to file a gift tax return for gifts under the $15,000 limit ----these don't count toward your $5.6 million lifetime gift total.

What Does This Mean For Special Needs Trusts?

A contribution to a Special Needs Trust does not trigger the requirements of the annual tax exemption unless the trust beneficiary has certain withdrawal rights (called "Crummey" powers).  However, most Special Needs Trusts are not created in this way, as doing so would cause  ineligibility for public benefits.

While it may be a relief to learn that you can give more than the $15,000 annual exemption to a person with special needs, you most certainly need to consider how that gift is transferred to your loved one and what it could do to his or her public benefits.  If you are not giving this money into a Special Needs Trust, please tread carefully and get the advice of a qualified Special Needs Planning attorney before making any transfers.

If you need help determining the best options when transferring money to a person with special needs, please call the office to schedule an appointment.

People receiving SSI benefits (and anyone else, for that matter) can qualify for Disabled Adult Child (DAC) benefits if:

 

-----they became disabled prior to age 22;

-----one of their parents paid into the Social Security system for the required number of quarters;  

and

-----that parent dies, retires or becomes disabled.

When the parent retires or becomes disabled, the child will receive 50 percent of the parent's Social Security benefit, and if the parent dies the payment is increased to 75 percent of the parent's benefit.   This additional benefit causes no reduction in the parent's Social Security benefit.

Under this program the disabled adult child is only able to draw DAC benefits from one parent at a time----this would be the higher amount.

To receive this benefit, the disabled adult child must be single or married to another person who is also receiving DAC benefits.

When a person starts receiving an SSDI payment, those additional funds will normally cause the person to lose their SSI benefits if the amount that they receive from their parent's work record is greater than their current SSI benefit amount.

Fortunately, under something called the "Pickle Amendment" the receipt of additional SSDI funds does not cause the disabled adult child to lose their Medicaid eligibility that would normally result from a loss of SSI benefits. 

In addition, after the disabled adult child receives two years of SSDI benefits, they will also begin to receive Medicare benefits.

It is important in order to ensure receipt of the DAC benefits that the parent informs Social Security that they have a disabled child when they apply for Social Security for themselves and have someone in the family report when the parent passes away.