My grandson is seriously ill. I want to pay his medical expenses, but am I limited to the amount of the gift tax exclusion?

We are sorry to hear about your grandson’s illness. Your offer to pay for his medical treatment may help him get the care that he needs and significantly reduce the financial burden that is on his parents.

In 2015, you can give someone up to $14,000 a year without worrying about gift taxes. While you can gift someone more than $14,000 annually you will have to file a gift tax return and pay taxes on the amount that is over $14,000 unless an exception to the general gift tax rule applies.

There Is an Exception for Medical Expenses

Since 1982, there has been an unlimited exemption from gift tax for medical expenses that a person pays on behalf of someone else. Federal regulations allow you to pay your grandson’s medical expenses, or anyone else’s, without worrying about gift taxes implications. Specifically, you can pay for someone else’s medical costs related to:

  • A diagnosis
  • A cure
  • Mitigation, treatment, or prevention of disease

This can relate to any function or structure of the body. It may also apply to transportation costs that are essential for medical care.

It is important, however, that you pay the medical provider directly instead of providing money to your grandchild or child with directions on how to use the money for medical costs. You can still provide your grandchild with up to $14,000 in gift money annually if you so desire.

We hope that this information is helpful to you, and to your family, and we wish your grandson a fast and complete recovery.

 

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm