Legal Question in Elder Law in Massachusetts

Re: Estate Planning

Assuming your father lives at least 3 years, the gift will not be included in his estate and there is no estate tax.

Assuming your mother survives your father and the estate is properly set-up it should have no effect on his estate taxes.

I assume your father has an estate plan and the $240,000 is not going to render him destitute as well so he would not need medicare to pay for his nursing home or Mass Health to pay his medical bills.

If this is all true, then it would appear the information you have been given is correct.

Re: Estate Planning

Assuming he was not liable on the mortgage he paid off, and received no consideration for the payoff, and did it all with "donative intent", the $240,000 is a gift.

Since the gift exceeds the annual gift tax exclusion ($12,000 in 2008, $13,000 in 2009) a gift tax return must be filed (Form 709). He'd get to use the $13,000 exclusion, and if his spouse joins the return for "gift splitting" purposes, he'd get to use $26,000 per donee. The balance is a "taxable" gift, but if your dad has not made any prior "taxable" gifts, he can use his lifetime $1,000,000 gift tax exemption, take the credit on his 709, and pay no out of pocket tax. This $1,000,000 comes off his $3,500,000 estate tax exemption, reducing it dollar for dollar.

The gift certainly has tax implications (reduces dad's lifetime exemption and estate tax exemption amount), but assuming no prior taxable gifts (or less than $760,000) your father will not have to pay out of pocket at this time.

A gift is not income to the recipient, so you will not have to pay out of pocket either.

And your father does not have to survive three years, as far as I am aware - they changed that rule quite some time ago, and now it only applies in certain limited situations not applicable in your case (transfers with retained life estate, life insurance policies, transfers effective on death, revocable transfers to name the most common)

Gift tax return is due April 15 in the year following the gift.