San Antonio Express-News
January 17, 2006

Forced Waiver of Advance Directive

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Gift Tax is Different from Medicaid

copyright 2006, Paul Premack

Requiring a patient to waive legal rights in order to obtain necessary health care certainly interferes with individual choice. Despite what they told you, there is not a federal law that requires such a waiver. Instead, they are covered by the federal law requiring medical facilities to accept any advance directive a patient has made pursuant to that state’s law. They are required by federal law to be capable of providing resuscitative services, but if the patient refuses those services they must accept the choice.

For instance, Texas law allows anyone to execute an "out of hospital do not resuscitate order". The law clearly requires outpatient hospitals to honor a patient’s advance choice to avoid resuscitation. This facility’s Waiver requirement violates both state and federal law, and you should consider filing a complaint with the Texas Department of State Health Services, which oversees licensing of these facilities.

Dear Mr. Premack: My CPA told me that it is legal to gift $11,000 every year to each of my children. I don’t have that kind of money, but know people who do. But reading in your column about Medicaid’s transfer penalties, I wonder if the gift law has been overturned. I’m sure that would affect a lot of innocent people who never meant to do anything fraudulent. – R.N.

There is a distinct difference between the gift tax laws and the Medicaid laws. The Medicaid transfer penalties do not overturn the gift tax exemption; rather, they are a factor that must be considered when deciding whether to make a gift at all.

If you have some money and decide to give it away, you have to ponder the effects that gift may have on you. Will you have enough money left to pay for your continuing needs? Will you owe any taxes because of the gift? Will the gift have a negative impact if you need Medicaid assistance in the future?

Assume you decide giving $20,000 to your son is affordable. As of 1/1/06 the first $12,000 is free of gift tax (it went up from $11,000). You can pay gift tax on the excess $8,000 or you can use part of your lifetime million-dollar credit to eliminate the gift tax, which is the choice most people would make. So gift tax is not a big consideration.

On the other hand, if you require assistance from Medicaid in the future, a $12,000 gift will cause them to deny coverage for 102 days. This is assuming that (a) less than 5 years have passed since the gift was given, and that (b) Congress imposes the new more restrictive law they are expected to vote on later this month. Hence, the Medicaid consequences can be a bigger consideration than the gift tax consequences.