Legal-Ease: Independent requirements for gifts, house lots


LEGAL-EASE

By Lee R. Schroeder - Guest Columnist



In high school, Mr. Piper and Mr. Walls taught me biology and algebra, respectively, along with the invaluable principle or idea of having to satisfy multiple, completely independent requirements.

In their classes, Mr. Piper and Mr. Walls would provide me with two grades/scores for each project. One grade was based solely upon whether the correct, logical process was used in getting to the answer. The second grade was based solely upon whether the answer was actually correct.

If my initial information was wrong, I might use the correct process but end up with the wrong answer. Vice versa, I might incorrectly analyze a problem but luckily happen upon the correct answer. Perfection in process or perfection in the answer had no effect on the other. Process and answer for the same project were evaluated completely independently from each other.

The principle of completely independent requirements, where satisfying one requirement has no effect on satisfying another requirement, is a mental hurdle for most of us. However, applying that principle is particularly challenging in the contexts of gifts and house lots.

Most people are familiar with the “annual gift tax exclusion” amount of $15,000 for 2020. Any person can give any other person up to $15,000 in 2020 without informing the IRS. In fact, most people can give away millions of dollars (presuming a person has it to give) a year without tax to the giver or the receiver. The $15,000 number for 2020 is the “de minimis” gift amount between any two people, about which the IRS need not be told in 2020.

In 2020, some parent will inevitably give his or her child $14,900. In 2021, that parent will then apply for Medicaid (to pay for a nursing home stay). Medicaid will penalize the parent for the 2020 gift and legally “presume” that the parent still retains the $14,900. This outcome results because Medicaid’s treatment of gifts is completely separate from the IRS’s treatment of gifts. Gifts of almost any amount made during the five years immediately preceding a person’s first Medicaid application have implications on Medicaid benefits even though those gifts may be such that they were not required to be reported to the IRS.

Similarly, a young couple may be fortunate to come across a farmer willing to sell a few acres to the couple for a house lot. The couple may contact the township trustees and find out the minimum lot size, hire a surveyor to lay out the lot and then want to begin construction. The problem usually arises in that any township’s requirements on minimum lot size and configuration is completely independent from the county health department’s requirements for lot size and configuration. The health department’s requirements are individualized based upon soil type of the particular lot as well as the planned locations of the house, buildings, driveways, well and septic system on the particular lot.

Otherwise stated, when it comes to house lots, the township trustees must be satisfied, and completely separately, the health department must be satisfied.

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LEGAL-EASE

By Lee R. Schroeder

Guest Columnist

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.

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