What To Know About The Medicaid Five-Year Look Back

Law Blog

The "five-year look-back period" is a crucial concept in estate planning. It refers to a rule that Medicaid uses to review an applicant's financial transactions and asset transfers within the five years preceding their application for long-term care benefits. 

Medicaid Eligibility and Asset Transfer 

Medicaid is a government program that provides healthcare coverage for individuals with limited financial resources, particularly for long-term care costs. For example, those who enter a nursing home without the funds to pay for the care are automatically placed on Medicaid. When the nursing home patient passes away, Medicare retains the right to take estate property from the deceased estate. 

Penalty Period

 If a person has made asset transfers during the look-back period, Medicaid imposes a penalty period. The penalty period is a period of ineligibility for Medicaid benefits based on the value of the transferred assets. That means property transferred to a family member, for instance, is subject to a waiting period. 

Estate Planning Implications 

The five-year look-back period significantly affects estate planning strategies, particularly for individuals who may require long-term care in the future. Here are some considerations:

  • Timing: Since the look-back period is five years, it is advisable to plan well in advance to allow sufficient time for the asset transfers to fall outside the period. Implementing asset protection strategies, such as irrevocable trusts or gifting, at least five years before the potential need for Medicaid benefits can help protect assets.
  • Irrevocable Trusts: Irrevocable trusts are often utilized in Medicaid planning to protect assets while maintaining some control. Transferring assets into an irrevocable trust can remove them from the individual's countable assets for Medicaid eligibility purposes after the expiration of the look-back period.
  • Gifting: Making gifts of assets to family members or loved ones can be an option, but it must be done with careful consideration. Gifts made within the five-year look-back period may trigger a penalty period, affecting Medicaid eligibility.
  • Long-Term Care Insurance: Obtaining long-term care insurance can be an effective way to plan for future care needs while preserving assets. By securing coverage before the need arises, individuals can potentially avoid relying on Medicaid altogether.

Seeking Professional Guidance

Given the complexities of Medicaid rules and estate planning, it is crucial to consult with an experienced elder law attorney or estate planning attorney. They can provide personalized advice based on the individual's specific circumstances, helping develop a comprehensive plan that takes into account the five-year look-back period and Medicaid eligibility requirements.

Make an appointment with an estate planning lawyer for more information. 


15 June 2023