Yes you can but any gift to your children will disqualify you from receiving or qualifying for Medicaid benefits. If you are concerned about gift taxes you can give away up to $1 million dollars and pay no gift taxes.
If you give away more than $10,000 a year to any one person you are required to file a Federal Gift Tax Return for that year. Gifts of $10,000 or less do not require the filing of a Federal Gift Tax Return. This $10,000 amount is called the Annual Gift Tax Exclusion Amount. It is indexed for inflation and is currently set at $13,000 per year. Even if you give away up to $1 million dollars and file a Federal Gift Tax Return that year, you do not owe any gift taxes. Only when total gifts exceed the $1 million dollars will you pay gifts taxes. However the real problem can be the future income tax problems you are creating for your children. If you give a child an appreciated asset such as your home or appreciated land or stock your child will take your cost basis in that asset. When your child sells that asset he will pay income taxes on the difference between the sales price minus his cost basis. This is known as capital gain. For example if you give your home to your child and you paid $50,000 for your home the cost basis of that gift to your child is your cost basis $50,000, what you originally paid for the home. When your child sells that home for say $100,000 whether sold before you die or after you die your child will pay tax on the amount of capital gain which would be $50,000 ($100,000 – $50,000). However if you sell your own personal residence and you have lived there at least 2 of the past 5 years you can sell your own home and pay no tax. This is a tax free sale under Internal Revenue Code Section 121. In addition if your child receives your home or any appreciated asset after you die thru your will, a probate or a trust (anything as a result of your death) he will receive a stepped up basis to the fair market value on the date of your death. This usually saves your child thousands of dollars in capital gain taxes when he sells that appreciated asset. For example if your child inherits your home after you die then your child’s cost basis would be $100,000 which was the fair market value on the date of your death. If your child then sells the home for $100,000 his gain would be $-0-. If he held the property for say 10 years then sold it for $150,000 his gain would be $50,000 ($150,000 – $100,000). Proper planning can help avoid all of these tax problems.