Many clients call our office with questions about the “Medicaid lookback period”. It’s term many people have heard, but few truly understand what it means. When it comes to qualifying for Medicaid, understanding the lookback period is crucial.
What is the “5 year look back”? Any transfers made within 5 years of applying for Medicaid must be disclosed when applying for Medicaid-funded benefits. If those transfers were made for less than fair market value, a “transfer penalty” may be applied. This penalty is a period of ineligibility for Medicaid long-term benefits. Depending on the amounts and timing of the transfers, it is possible to create a plan to minimize the effects of the penalized period.
Some examples of a transfer made for less than fair market value include selling your home to a relative for less than the appraised or tax value of your home, paying for your grandchild’s college tuition or wedding, monetary donations to a charity including tithes to your church. There may be things you’ve done within the 60 months of applying for benefits that you didn’t even realize would be considered a “gift”.
The length of the penalty period depends on the value of the “gift” or assets transferred for less than fair market value as well as the state’s penalty divisor. The penalty divisor changes annually and is based on the state’s average cost of private pay care to a nursing facility. The penalty period is determined by adding the value of “gifts” or transfers for less than fair market value and dividing the total by the penalty divisor. This will give you the number of days for the length of the penalty. The private pay daily rate of the facility will be charged for the duration of the penalty.
If you have done gifting in the past 5 years which violates the Medicaid look-back period, it is still possible to become Medicaid eligible. It is very important to work with a professional, specifically a Certified Elder Law Attorney, so they can help you create a plan moving forward that makes the most financial sense in your situation.
Written by – Staci Hornberger