One of the most overlooked aspects of the Medicaid program is the 5-year look-back period. A basic understanding of Medicaid is needed before you can understand the look-back period.
Medicaid is different from Medicare (although many people, by mistake, refer to the two programs interchangeably.) Medicare is an entitlement program paid for through payroll withholding. Medicaid is a form of social welfare designed to help people in need. Medicaid is a federally subsidized program administered by each state and the rules and benefits can and do often vary by state. So if you read something about the Medicaid program in California, the chances are it could be different in Utah.
As a social welfare program Medicaid is designed to help pay for long-term care (in home or in a nursing facility) once an individual’s funds and assets are used up. In simple terms, if you have $200,000 in savings, you are expected to use those savings to pay for your care – once your savings are gone, then Medicaid will kick in. In Utah, you can only have about $2000 in the bank to be eligible for Medicaid. Medicaid will look at all of your assets, including your house (for which there are special rules) in deciding your eligibility.
Many people try to become eligible for Medicaid by giving away all or part of their money and property. Federal and State governments are wise to this and they created a penalty so that you can’t give everything away to your family and shift the burden for your care to the government. The penalty is that you could be ineligible for a period of up to five years, if you give away money or property. This is the 5-year look-back period. If you give everything away in 2014, you might not be eligible for Medicaid until 2019! That’s a pretty stiff penalty!
Here’s an example: if you had $100,000 in the bank and you gave it to your children just as you were checking into the nursing home, you would not be eligible to receive Medicaid benefits to pay for your care for up to 5 years. This is a horrible result and therefore a horrible strategy! Who will pay if Medicaid won’t? You can hope that your children will, but if you really gave your money away, they wouldn’t have to.
I have several clients a month call asking about this very thing. They tell me they want to give their house, car and cash to their children so they will be eligible for Medicaid. I always give the same answer – DON’T DO IT!
The good news is that there are some planning techniques using trusts and other tools you can use to avoid this period of ineligibility and to be able to pay for your care. But in all cases, it’s difficult for people because you truly have to give up ownership or control of your money or property.
REMEMBER THIS: If you give away your money and property so that you can get Medicaid, you will be subject to the look-back penalty for up to 5 years. You should always consult with a lawyer specializing in Estate Planning and Medicaid transfers before doing anything that could impact your eligibility for Medicaid.
The Attorneys at Astill Law Firm have been specializing in Estate Planning, Trusts and Wills and Medicaid planning for over 30 years. If you have questions about Medicaid or Estate Planning in general, call our offices at 801-438-8698.