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What do you need to know about the Medicaid lookback period

On Behalf of | Aug 3, 2023 | Estate Planning |

Your potential need for long-term care is significant. Some studies estimate that as many as 70% of those over the age of 65 will need some form of long-term care in their lifetime. This care can be expensive, too, resulting in the depletion of your estate. That can leave you worried about your legacy and what you can provide for your loved ones.

Fortunately, you can effectively plan for your long-term care needs. One way to do so is to seek out Medicaid eligibility. While this government program can help cover a significant amount of your expenses, there are strict eligibility requirements that must be met. Perhaps the most challenging aspect to navigate in the process is the Medicaid lookback period.

What is the Medicaid lookback period?

To be eligible for Medicaid, your assets and income must be below a certain threshold. If your wealth is above that threshold, then the government considers you capable of covering your own long-term care needs.

But the government worries about Medicaid costs, which is why it checks to see if you’ve simply unloaded your wealth in short order so that you can meet eligibility requirements, thereby bypassing your obligation to cover your long-term care costs. They do this by looking back at all financial transactions that have occurred during the five years leading up to your Medicaid application.

What transactions during the lookback period are problematic?

There are a lot of transactions that can lead to Medicaid eligibility issues. This includes each of the following:

  • The selling of certain assets well below their fair market value
  • Transferring ownership of a house to a relative who is older than 21
  • Gifting money to your loved ones
  • Giving major assets, like a vehicle, to charity
  • Loaning money to loved ones
  • Paying for personal care without a formal agreement

Keep in mind, too, that your spouse’s transactions will also be under the microscope.

What happens if you engage in one of these transactions during the lookback period?

If the government finds that you’ve engaged in one of these transactions during the lookback period, then you’ll be hit with a penalty. This means that your ability to seek eligibility status will be delayed, putting you at risk of missing out on these benefits when you truly need them.

How can you protect your Medicaid eligibility?

Fortunately, there’s a lot that you can do to protect your interest here. First, you should be aware of the exempted transactions that won’t affect Medicaid eligibility. These include:

  • Transferring assets to your spouse
  • Transferring assets to someone else for the sole benefit of your spouse
  • Transferring a home to a child under the age of 21
  • Transferring a home to a blind or disabled child
  • Transferring a home to a sibling if they lived in the home for at least a year leading up to your long-term care stay and who already has an ownership interest in the residence

Second, you can be mindful of the lookback period and try to reduce your assets prior to those five years. This can be hard to do, of course, as you’re never really sure when you’ll need long-term care. You can also try to spend down your assets, although this won’t protect your assets for your loved ones to inherit.

Another option, though, is to engage in effective estate planning. By engaging in the process early on, you may be able to protect your wealth for your loved ones while securing your ability to obtain Medicaid benefits.

Know how to competently navigate the Medicaid eligibility process

There are a lot of nuances to rendering yourself eligible for Medicaid. If you don’t know how to navigate the process, then you might end up making yourself ineligible for the resources that you need. That’s why now is the time to start planning for your long-term care needs.