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What is a Statutory Gifts Rider & Why is it Needed?

The Statutory Gifts Rider or SGR, is a modification to a power of attorney that allows the agent to give gifts.  Without the Statutory Gifts Rider the agent under a power of attorney is only allowed to give gifts totaling $500 for the year for personal and family maintenance. The Statutory Gifts Rider may be used by an agent for both Medicaid and Estate tax planning purposes. Your agent must act at the instruction of the principal or act in the principal’s best interest. Due to the financial impact a Statutory Gifts Rider can have, it needs to be witnessed by two disinterested witnesses.

The Different Parts of the Statutory Gifts Rider (SGR)

Part A of the Statutory Gifts Rider allows the agent to give gifts up to the federal gift tax exclusion ($14,000) to the principal’s spouse, children, more remote descendants, and parents.   Double the gift tax exclusion ($28,000) can be given as gifts if a spouse agrees to the split gift treatment.

Part B is a modifications section to the SGR.  It allows for the principal to specify if they would allow gifts to be larger or small than the gifts tax exclusion.  In the SGR that Ira K. Miller & Associates prepares, we often give the agent discretion to make gifts for the purpose of gift, estate tax, or Medicaid planning for the principal.

Part C of the SGR allows for the agent to give gifts to himself or herself and specifies what gifts may be given.

Part D is acceptance by third parties and Part E is the signature of the Principal and Acknowledgement.

Daredevil Dan Example

Daredevil Dan over the course of his daredevil career experienced many concussions. Due to this, he has become forgetful and can no longer take care of his finances. He also has begun wandering the neighborhood at night and can no longer find his way home. His son, Joseph, has lived with Daredevil Dan in his house for the last 3 years and helps his father get to doctors appointments and helps him with all aspects of daily living. Eventually it becomes too hard for Joseph and Joseph decides to put Daredevil Dan in a nursing home.

Daredevil Dan owns a home in his name alone and bank accounts less than the Medicaid limit.  Joseph is the agent under Daredevil Dan’s power of attorney. Daredevil Dan receives Medicaid while in the nursing home. What can be done to preserve Daredevil Dan’s home from a Medicaid lien being placed on it?

Example 1-  There is a Statutory Gifts Rider to the Power of Attorney

Joseph will be able to gift himself the house as caretaker child. No lien would be placed on the house and the transfer would be considered a Medicaid Exempt transfer and Daredevil Dan would continue on Medicaid.

Example 2- There is No Statutory Gifts Rider

Joseph could not gift the house to himself. He does not have authority under the power of attorney as the house is a gift of more than $500. In order to transfer the house to himself as caretaker child, a costly guardianship proceeding would need to be commenced.

Example 3- Joseph does nothing

If Joseph does nothing a Medicaid lien will be placed on the home. When the house is sold Medicaid will recover from the sale of the house the money they expended on behalf of Daredevil Dan.

To learn more powers of attorney, statutory gifts rider, or Medicaid planning contact Ira K. Miller & Associates.