Medicaid’s Five-Year Look-Back Period

by Stuart Schoenfeld and Monica Ruela

The need to protect your assets is particularly critical as you approach retirement age. We often advise clients who are in their 60s or nearing retirement to be cautious and strategic when making asset transfers and gift-giving. Many are surprised to learn that those gifts could disqualify them from receiving Medicaid benefits, should they need to live in a nursing home or facility.

In New York, the Medicaid Rules stipulate that Medicaid benefits for nursing coverage will not be granted to an applicant who has made gifts of their assets in the five years prior (“five-year look-back”) to requesting Medicaid coverage. For this reason, Medicaid generally questions transactions in excess of $2,000. As a part of the Medicaid application process, our lawyers thoroughly review a client’s financial records for the last five years.

This meticulous review process gives us a chance to determine whether there will be any issues with the Medicaid application that we need to address before submission. The state Medicaid agency conducts the same investigation of your assets to determine if certain assets were transferred during the look-back period for less than fair market value.

Some Good News, First

It’s important to know that this guideline only applies to applicants seeking nursing home Medicaid coverage. Community-based or home care Medicaid recipients are unaffected by the five-year look-back period. This in itself is often misunderstood by many would-be applicants; they are deterred from applying for community Medicaid because they mistakenly believe this financial threshold cancels everyone’s eligibility.

Why Do These Asset Transfer Rules Exist?

The rules were established to stop people from taking advantage of the Medicaid process and its resources. The rules prevent scenarios where an elderly person needing care moves into a nursing home, gifts their assets to their children, and then applies for Medicaid.

Nursing home care is more costly than home-based or community care and Medicaid does not want you to impoverish yourself in order to qualify. With no five-year look-back for community care, Medicaid is encouraging people to take care of their loved ones at home rather than in a nursing home.

Certain Exceptions Apply

Every situation differs and it’s always best to consult a qualified elder care and Medicaid lawyer to assess yours. Some further details about asset transfer exceptions include:

• When Medicaid reviews your financial statements, it excludes retirement assets like IRAs and 401K plans from your total resources. In certain situations, the family residence may be exempt as well.
• Transferring assets to a spouse and/or handicapped or disabled children usually remain exempt from penalties. Certain transfers to children may also be exempt.

Conclusion

Generally speaking, people are living longer and retiring in their mid-to-late 60s. That is why we often advise clients to be mindful of the five-year look-back and how it relates to creating an effective asset protection plan. We can help provide cautious estate planning strategies that can help keep your Medicaid eligibility unaffected.

If you have questions regarding Medicaid Transfer Rules, contact us.