What to know about Medicaid’s 5-Year Look-Back Period
Nursing homes in the Hudson Valley can cost upwards of $15,000.00 per month. Qualifying for Medicaid to get those costs covered is critical. You may have heard that there is a five-year look back period if you want to shield your assets from nursing homes. Here’s what you need to know:
1. You must show all of your financial records to qualify for Medicaid.
When applying for Medicaid, you have to provide documentation, including bank statements and all other financial records, for a 60-month period. Your county’s Department of Social Services will evaluate all of the records provided. They will assess “penalties” (delays in Medicaid coverage calculated with a mathematical formula) for gifts and transfers of assets that exceed $2,000.00.
2. “Transfers” come in many forms.
People often get penalized for transactions that they did not see as gifts at the time. Paying college tuition for grandchildren, selling a car to a family member for less than full market value, or helping a son or daughter pay their mortgage are all examples of things that many people commonly do not consider gifts, but they can cause you to incur Medicaid penalties. Even large cash withdrawals from bank accounts can raise red flags with Medicaid, if there are no explanations or receipts.
3. The look back only applies to Medicaid for nursing home care.
There are numerous different types of Medicaid, including community-based care where home health care workers are sent out to provide disabled elderly people with care at home. Only chronic care Medicaid for nursing homes requires the rigorous five-year look-back period.
4. There are certain notable exemptions from the look-back.
Transfers between spouses do not start a look-back period. If there is a healthy spouse living in the home, the ill spouse can transfer his or her assets to the healthy spouse’s name and then apply for Medicaid. The healthy spouse then has numerous options, whereby he or she can safeguard and protect the assets.
Furthermore, IRAs, 401(k)s, and other qualified retirement accounts are exempt from Medicaid in New York State and are not subject to any look back period.
Other exemptions include the caregiver child rule, in which a nursing home resident applying for Medicaid is entitled to transfer his or her home with no penalty to a son or daughter who has lived in the home and taken care of him or her for the two previous years, and the disabled child rule, exempting asset transfers to children who are legally disabled and receive government benefits.
5. It is advisable to consult an attorney to apply for Medicaid.
If you or a loved one has assets to protect, then it is advisable to consult with an elder law attorney. If you start while you are healthy and well, an attorney can help you strategize about the look back period and use tools, such as irrevocable Medicaid Asset Protection Trusts, to shield and insulate assets from long-term care and nursing home costs.
That said, even if someone has already entered a nursing home, it is not too late to consider asset protection. You do not have to spend down all of your assets and then apply for Medicaid. Attorneys can guide you toward tools that will protect at least a portion of the assets, even without advance planning.
Taking active measures to strategize and plan for Medicaid ensures that you will have assets to leave to your loved ones.