14 May
Some individuals need long-term care as they age. This is costly and can have a considerable impact on a person’s finances. For some, the expense of this type of care is prohibitive. Some individuals need to rely on Medicaid to cover some of these expenses. This needs-based program is administered by dedicated government agencies.
One requirement is that an applicant doesn’t have assets or income over a certain limit. Unfortunately, a person’s assets at the time of application aren’t the only thing that matters. There’s a lookback period that applies in these cases.
How long is the lookback period for Medicaid eligibility?
The Medicaid lookback period is 60 months dating back from the date of the application. All financial transactions are scrutinized during that time.
What’s the purpose of Medicaid lookback periods?
The Medicaid lookback period prevents people from being able to give away assets for the sole purpose of qualifying for Medicaid. If transactions are classified as ineligible for the purpose of eligibility, the applicant will have to pay a penalty.
The penalty is the number of months the individuals would be ineligible for Medicaid based on dividing the dollar amount of ineligible transfers by the average private patient pay rate for their area. The resulting number is how many months they’re ineligible for coverage.
What types of red flags are they looking for?
There are a few specific situations that are red flags during the lookback period. One of these is transferring assets to an irrevocable trust during the five years. Funding an irrevocable trust is considered a gift.
While people can make gifts up to a specific amount to pay down an estate for tax purposes, those same limits don’t apply for the Medicaid lookback period. Anything they give away, including charity donations, can incur a penalty.
Documentation is often a key to dealing with the lookback period. For example, a house sold for market value during the lookback period would be handled differently than one that was gifted or sold for below value.
Medicaid planning as early as possible is important. Seeking legal assistance throughout this planning phase is critical because running afoul of the lookback period can result in detrimental consequences.