Medicaid’s Five Year Look Back Rule
January 30th, 2015 by David McCurry
A frequent question I hear from my clients is “How do I qualify for Medicaid if I need to go to the nursing home?”
To qualify for Alabama Medicaid, an individual’s income must not exceed $2,199.00 per month and an individual’s countable assets must not exceed $2,000.00 (based on 2015 law). Some examples of non-countable assets include burial items, one automobile, household furnishings, certain life insurance policies and a home. If a Medicaid recipient owns a home, then Medicaid has the authority, in most cases, to place a lien against that residence and recover the lien when the family sells the house. If an individual’s assets are over the $2,000.00 limit, then Medicaid requires the individual to spend down his or her assets until they are below the $2,000.00 limit. Most people don’t like the idea of spending down their assets to qualify for Medicaid and this leads them to ask “Can I give all of my assets away and qualify for Medicaid?” The short answer is it just depends.
Alabama Medicaid has a five year look back rule that prevents individuals from giving all of their assets away right before they apply for Medicaid. Any non-exempt transfer of assets within the last five years will result in a penalty against the Medicaid applicant. The penalty is a period of time that Medicaid denies Medicaid assistance for the applicant and the length of this penalty period depends on the value of the improperly transferred assets. Any transfer of assets that occurred more than five years ago will not cause a penalty.
A healthy person who does not anticipate the need for nursing home care within the next five years may consider transferring assets out of his or her name if their goal is to eventually qualify for Medicaid should nursing home care becomes necessary. The next issue to address is who will receive the transferred assets. Many times my clients tell me they want to transfer the assets to their children. Children are potential candidates but there are certain risks involved when transferring assets to children. What if a child dies or becomes incapacitated? Or what if a child has a lawsuit or divorce filed against him or her? If any of these events occur then the transferred assets may be owned or controlled by someone who has no desire to assist the parent/transferor if the parent needs financial assistance in the future. An alternative transferee to consider is a Medicaid Trust. All of the risks involved in transferring assets to children are reduced or eliminated through the use of a Medicaid Trust.
The challenges of paying for nursing home care are dependent on each client’s particular situation. Meeting and overcoming those challenges requires careful planning and the advice of an estate planning professional.
The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney. If you require legal advice, please consult with a competent attorney in your area.