Getting Familiar With The Medicaid Five-Year Look-Back Period

Feb 29, 2024 | Medicaid

Medicaid is a federal financial aid program designed to help low-income Americans, seniors, disabled individuals, and those with chronic or long-term medical conditions. For seniors, Medicaid is often the only way to pay for the extraordinary cost of long-term/nursing home care because few individuals could pay this amount from their own pockets. In fact, the average cost of a nursing home in Utah is over $7,000/mo. for a shared room and $9,000/mo. for a private room!

Only a small percentage of the population could hope to afford such extreme costs

and even fewer actually qualify for Medicaid; applicants must fall below a certain resource threshold, depending on the total amount of money one has. The requirements change annually, but the current maximum allowable income to qualify for Medicaid is $20,120, as of 2023, and applicants must have less than $2,000 in total assets, including:

  • cash
  • stocks
  • bonds
  • Investments
  • bank accounts (checking & savings)
  • real-estate (non-primary)
  • IRA’s
  • 401K’s

Based on these low thresholds, you might believe you could never qualify for Medicaid, so why even bother? The fact is, you can still qualify with the assistance of a Medicaid planning attorney, who can advise you on how to set up a Medicaid trust and implement other strategies that can be used to protect your assets and that still allow you to qualify for Medicaid.

The most important thing to be aware of with respect to Medicaid planning is something called a “look-back” period. You may have heard of that term if you have done any research on Medicaid, but it can be confusing! Let’s take a closer look at what Medicaid’s look-back period means for you.

What Is The Look-Back Period?

The Centers for Medicare and Medicaid Services (CMS), to ensure that people with resources above the limit are unable to qualify, created a system for reviewing the financial histories of all applicants. When an applicant applies for Medicaid, under the look-back period, the financial transactions that occurred prior to their application will be closely scrutinized and evaluated.

The idea is to ensure that people don’t sell assets, or otherwise transfer assets (by gifting or otherwise) to friends or family members, simply to qualify for benefits. Any financial transactions within the 5 year period prior to the application will be carefully looked at. You will be required to provide documentation and access to 5 years’ worth of financial records when you apply.

Implications Of Breaking The Look-Back Regulations 

Any transfers of assets occurring during these 5 years could be counted against you and render you ineligible. While there are some exceptions, in most situations, giving away money at any point during the five-year look-back period will result in a penalty that will prevent you from being eligible for Medicaid or from receiving benefits until the penalty period has ended.

Examples of such commonplace things that you wouldn’t intuitively think is a look-back and yet did violate the look-back rules include:

  • Giving money to your niece or granddaughter for their high school graduation or wedding
  • Selling a vehicle to a local charity for half its value
  • Paying a nurse or personal care assistant who works in the household without a formal contract (or paying a neighbor to run errands for you, or paying a cleaning service without a formal contract, etc).
  • Selling your boat for cash without documentation
  • Setting up an irrevocable trust and transferring real estate into it
  • Gifting a large sum of money to your adult children

Look-Back Rule Exemptions

There are certain kinds of property transfers that you can make that you immediately know you’re going to be penalized for later as they look into your finances to decide whether you qualify for Medicaid. The following, however, are some exceptions to the rule:

    1. Gifts and transfers to your spouse will not result in a penalty for you, regardless of how long ago they were made or how much you transferred. All of your assets belong to you equally, regardless of whether they are held jointly or under just one name.
    2. You won’t be penalized for any gifts or other transfers to children under age 21, or to those who are disabled/legally blind, no matter how large or whether it involves setting up a trust or not. However, exercise caution when giving assets to disabled children, as unlike you, they might later face consequences for receiving them, as it might increase their allotted resources.
    3. Additionally, the Medicaid look-back period has two official exceptions: the

Caregiver Child Exception

    and the Sibling Exception. You can transfer the house to your sibling without incurring penalties if he was the only owner or had an interest in it and had resided there for a minimum of a year before you were admitted to the nursing home. You can transfer the home to your adult child and avoid penalty if he looks after you for at least two years prior to your admission to a nursing home and lives there during that time.

If you’re planning to make any of these transfers, you should also speak to an attorney—not only to ensure the process goes off without a hitch but, more importantly, to avoid the unwitting errors that can result in your disqualification from aid.

Plan Ahead For The Look-Back Period!

Many elderly people have too many assets to be eligible for Medicaid but not enough to pay for nursing home care. For this reason, it is critical to plan well in advance and restructure your asset structure before the look-back period begins in order to avoid incurring any penalties.

If, on the other hand, you were not aware that there was a look-back period, or if you are already locked in the penalties, and you need to enter a nursing home immediately, you have some options available to you, such as to get the assets back or to apply with an Undue Hardship Waiver. Regardless of where you are in your journey, it is always best to consult with an experienced Medicaid planning attorney to discover your options.

Contact A Utah Medicaid Planning Professional For Help

Having a professional who is familiar with the nuanced rules regarding Medicaid planning is crucial to knowing what you can and cannot do to qualify your loved one for much needed benefits while at the same time providing for yourself and your family’s future. With a combined 95 years of experience, the attorneys at ProvenLaw have helped countless seniors and their families with Medicaid issues, such as the look-back period. With empathy and compassion, they will guide you through this complex process and put your worries to rest. There is no need to do all of the work and paperwork on your own; let us handle the heavy lifting while you relax and spend time with your family. Contact us for a free consultation to find out how you can get started.

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