Common misconceptions surrounding Medicaid is the “look back period” for asset transfers and how such transactions affect an individual’s eligibility for long-term care. While many people try to give away their assets in order to qualify for Medicaid, Congress has established a penalty for those who attempt to transfer their assets to another party for less than the fair market value, triggering a period of time when the individual will be ineligible for Medicaid coverage.
Designed to pay for an individual’s long-term care once all other funds and assets have deteriorated, Medicaid is supposed to be a last resort for those who can no longer financially provide for themselves. Simply, if an individual has a sum of money in savings, they are required to support themselves until the funds are extinguished; once gone, Medicaid coverage can begin.
Some individuals have discovered ways to avoid this process by arranging and transferring their assets for the benefit of their family members, all while allowing them to qualify for Medicaid under its guidelines.
If an individual transfers assets while applying for Medicaid, a period of “ineligibility” is calculated. This period of time is determined by dividing the amount transferred by the amount Medicaid determines to be the cost of a nursing home in the individual’s state. For example: If an individual has transferred $50,000 worth of property and the monthly cost of care in their state averages to be $5,000, the individual would be ineligible for Medicaid benefits for 10 months.
The “Look Back Period”
In order to apply for Medicaid, an applicant must acknowledge any and all financial gifts and transfers made within five years of the date of application, frequently called the “look-back period.” Any transfer of assets during this period is subject to penalty, whereas any transfers made before those five years are not penalized. If there is a transfer made within the five year period, the look back period would not come into effect until an individual residing in a nursing home has exhausted all other supporting funds for health coverage and has also applied for Medicaid.
There are some cases in which Medicaid will not penalize a transfer of assets. Those exempt include:
- A spouse
- A trust made for the benefit of a blind or disabled child
- A trust for a disabled person under the age of 65
Furthermore, certain exceptions apply to the transfer of a home. An individual’s home may be also transferred to the following without penalty:
- A child under 21
- A blind or disabled child (does not have to be a trust)
- A sibling who has inhabited the home for at least one year before the applicant’s relocation to a nursing home and who holds an equity interest in the property.
- A child caretaker who has inhabited the house for at least two years before the applicant’s relocation to a nursing home (such an individual must have provided care allowing the applicant to remain at home rather than a nursing home).
Planning for both your own and your family’s financial future does not have to be an overwhelming process. Before you decide to make any transfer of assets, it is highly recommended that you consult with an experienced attorney in order to avoid penalization.
Since the look back period differs from state to state, if you believe that you have violated Medicaid’s guidelines, seek help immediately so that the situation is handled both efficiently and professionally. For an experienced professional, please call Van Smith and his team at Smith Strong, PLC at one of our offices at (804) 325-1245 (Richmond) or (757) 941-4298 (Williamsburg).
Editorial Assistance by: Isabella Cruz