The Medicaid 5-Year Look Back can be intimidating, but with proper planning and a little education, you can learn how you can avoid being penalized.
Your daughter got married recently, and you’d been saving up for that big day for years. With all the excitement, you gifted the newlyweds a large sum of money to help cover the wedding—something many parents dream of doing. But you may not have realized that this generous act could hurt your chances of qualifying for Medicaid down the line, leaving you to cover expensive healthcare costs out-of-pocket.
Before you feel like you’re walking on eggshells with large financial decisions, let’s get a better understanding of what Medicaid’s five-year look-back period is and what kind of financial moves could impact your eligibility.
Understanding the Medicaid Five Year Look Back Period
As we age, healthcare costs rise. From more frequent doctor visits to long-term care needs, healthcare adds up fast. Many people turn to Medicaid for help—a federal healthcare program designed to provide medical support for those with limited income and resources.
However, qualifying for this program isn’t always straightforward. When you apply for Medicaid care, the state will review your finances from the past five years (60 months) to ensure you haven’t given away money or sold assets to qualify for Medicaid’s health care coverage. This is what’s known as the Medicaid look-back period.
When you apply for Medicaid, you must provide proper financial documentation to prove you haven’t violated any of the look-back rules. If you’ve given away money, transferred assets, or fail to provide proper records, you could face a penalty period and be left ineligible for some time.
So, let’s say you gifted your daughter $50,000 for her wedding within those five years. If the average cost of nursing home care in your state is $5,000/month, you could face a 5-month penalty period. This would leave you responsible for covering your healthcare costs out-of-pocket. Each state has its own set of “penalty divisor” based on the exact cost of asset or gifts given.
Common Look-Back Violations
Here are a few things Medicaid could flag as violations during the look-back period:
- Gifting money or expensive items to friends and family
- Paying someone else’s bills (like rent, school, or medical expenses)
- Donating large sums to charity, churches, or political campaigns
- Giving away or transferring your home, car, or other valuables
- Selling large ticket items for way less than they’re worth
- Loaning money with no expectation of repayment
How to Qualify
Working with an elder law attorney can help ensure your financial records are in order and that your assets are in line in a way that follows Medicaid’s rules. Some strategies include:
- Setting up an irrevocable trust to move assets out of your name.
- Transforming assets into income with Medicaid-compliant annuity.
- Applying for long-term care insurance, which helps cover nursing home expenses and protects your savings.
Our Don’t Let Medicaid Drain Your Savings: Trust Protection Options blog provides a deeper look into these strategies.
The key to qualifying for Medicaid is to start planning now. With proper guidance from an elder law attorney, you can protect your assets and avoid penalty. Download our Medicaid Planning Guide to get started, and reach out to our elder law attorneys at the Deliberato Law Center with any questions. Our team is here to help you navigate the complex world of Medicaid.
Contact Deliberato Law Center
If you have questions about the Medicaid 5-Year Look Back or about determining which estate planning tools are right for you, the experienced attorneys at the Deliberato Law Center are here to help.
