What You Should Know Before Gifting Assets to Family in New York

Published May 29th, 2025 by Klafehn, Heise & Johnson P.L.L.C

Gifting assets to family members can be a wonderful way to share your wealth, support loved ones, and plan for the future. However, in New York, gifting assets without a full understanding of the legal and financial consequences can create serious problems, especially when it comes to taxes, Medicaid eligibility, and protecting your own financial security.

At Klafehn, Heise & Johnson P.L.L.C., we work with individuals and families throughout Monroe, Orleans, and Genesee Counties to ensure asset transfers are done thoughtfully and legally. Before you make any significant gifts, here’s what you need to know.

1. Gift Taxes May Apply

While most gifts are not taxed directly to the giver or recipient, large gifts can trigger federal gift tax reporting requirements. In 2025, the annual gift tax exclusion allows you to give up to $19,000 per person per year without needing to file a gift tax return.

If your gift exceeds that amount, you will need to file a gift tax return (IRS Form 709), though you may not owe actual taxes if you are under the lifetime exemption limit.

New York State currently does not have a separate gift tax, but gifts made within three years of death can affect New York estate taxes. Gifting without careful planning can have unintended tax consequences for you and your heirs.

Need help planning tax-smart gifts? Contact us today.

2. Gifting Can Impact Medicaid Eligibility

If you anticipate needing long-term care services in the future and may apply for Medicaid, gifting assets could create serious problems.

Medicaid has a five-year look-back period. Any assets transferred for less than fair market value within five years of applying for Medicaid can result in:

Penalties and periods of ineligibility
Out-of-pocket payments for nursing home care
Delay or denial of Medicaid benefits

Gifting assets to family members without a Medicaid plan in place could jeopardize your ability to receive care when you need it most.

Talk to our team before making gifts if Medicaid planning is a concern.

3. Verbal Gifts Are Risky

In New York, gifts of significant assets should always be documented properly. Verbal promises to give property, money, or business interests can lead to confusion, disputes, or legal challenges later.

Written gift agreements, updated titles or deeds, and proper legal documentation help ensure your intentions are honored and protect both the giver and the recipient.

Protect your family from future conflicts by formalizing major gifts legally.

Schedule a consultation to formalize your plans today.

4. Gifting Real Estate Requires Extra Care

Transferring a house or land to a family member involves more than simply signing over a deed. You must consider:

Potential gift tax reporting requirements
Potential capital gains tax issues for the recipient unless the transfer is structured properly
Potential loss of property tax exemptions (such as STAR exemptions) unless the transfer is structured properly
Potential Impact on Medicaid eligibility

Gifting real estate without professional legal and tax guidance can have unintended consequences that cost you and your family money and stress later on.

Learn how to transfer property correctly by speaking with our team.

5. Alternatives to Outright Gifting

Sometimes, there are better alternatives to an outright gift, including:

Setting up a revocable living trust to manage assets
Using a Medicaid Asset Protection Trust to protect property while planning for future care
Structuring gifts over time or in other ways to avoid tax and Medicaid issues
Retaining a life estate in real property to maintain some control while transferring future ownership

The right strategy depends on your personal goals, family dynamics, and financial situation.

Let us help you find the best solution for your family’s needs.

Protect Yourself and Your Family With Proper Gift Planning

Giving assets to loved ones can be incredibly rewarding—but it must be done with care to avoid unintended financial and legal consequences. Whether you are planning small gifts, transferring real estate, or thinking about Medicaid and long-term care, the experienced attorneys at Klafehn, Heise & Johnson P.L.L.C. can help you make informed, confident decisions.

Serving families across Rochester, Brockport, and throughout Monroe, Orleans, and Genesee Counties, we’re ready to help you protect your intentions and your future.

Legal Disclaimer:

This article provides general information about gifting assets and estate planning in New York State and should not be considered legal advice. Every individual's situation is unique. For personalized legal guidance, contact Klafehn, Heise & Johnson P.L.L.C. in Rochester, NY. You can reach us here. Portions of this article may be considered ATTORNEY ADVERTISING under the New York State Unified Court System Rules of Professional Conduct (22 NYCRR Part 1200). Prior results do not guarantee a similar outcome.

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