What Really is the “Five Year Lookback” for Medicaid?

Mary was concerned that she would soon need nursing home care. She did not want her funds used up in long term care expenses so she gave her only son, Joe, her life savings of $100,000. One year after giving Joe the money Mary experienced a major health crisis and needed to move into a nursing home. She no longer had money because she gave it to Joe. When she applied for Medicaid she answered yes (as she was required to do) to the question about giving money away within the prior five years. She also signed the required financial release form that allows Medicaid to look into her bank account history. Soon Mary received notice that she was denied Medicaid benefits because of the transfer to Joe. Even so, we could have helped Mary correct this problem and still be eligible for Medicaid benefits.

When the Deficit Reduction Act of 2005 was signed into law it required states that partner with the federal government’s Medicaid program to require a five year lookback on uncompensated transfers. This simply means that if a person applies for Medicaid the state must ask if the applicant had given away money in the previous five years. If the person did give away money, the state can deny Medicaid services for a time period depending on how much was given away, who it was given to and for what purpose.  

While Mary did not have a long time period between gifting and needing care, some people do. In hoping to protect assets for Medicaid purposes they may expect to wait at least the full five years. Those people can use planning and gifting tools such as irrevocable trusts to protect the assets which is often safer than gifting outright to children. But this kind of planning should take into consideration many different issues that could arise from the gifting. 

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