The Medicaid Look Back Period is the 5-year period prior to filing a Medicaid application during which all transfers without fair consideration are totaled to assess a period of ineligibility for Medicaid Long Term Care benefits. It is a common misconception that if any gift transfer is made, the person making the transfer must wait 5 years before applying for Medicaid. While this is true in the case of some larger gift transfers, it is by no means true in the case of every gift transfer.
The reason for this lies in the differences between the Medicaid Look Back Period and the Period of Ineligibility imposed upon gift transfers made within the Look Back Period. The Medicaid Look Back Period is limited to 5 years. On the other hand, there is no limit to the length of the Period of Ineligibility resulting from gift transfers made within the Look Back Period. The Period of Ineligibility is calculated by totaling the value of all gift transfers made within the Look Back Period and dividing that number by the average monthly cost of nursing home care for an individual in the state where the Medicaid application is filed. The larger the gift, the longer the Period of Ineligibility will be. However, the Period of Ineligibility from a gift transfer does not even begin to run until the Medicaid applicant actually files a Medicaid application and the individual is found to be eligible for Medicaid but for the gift transfer. The Period of Ineligibility then begins to run retroactive to the date of the application (assuming the individual met the functional, income and resource requirements at that time), rather than beginning to run retroactive to the date of the gift transfer itself.
This last point is crucial. For example, if we assume the average monthly cost of nursing home care in your state is $8,000 per month, then a one month Period of Ineligibility will be imposed for every $8,000 transferred as a gift during the Look Back period. An $80,000 gift transfer during the Look Back period will result in a 10-month Period of Ineligibility. If the individual making the gift would meet the criteria for Medicaid eligibility immediately after making the gift and the individual files a Medicaid application right away, the individual’s 10-month Period of Ineligibility would begin on the date of the Medicaid application. After 10 months, the individual can file a new application and immediately qualify for Medicaid, assuming the individual continues to meet the eligibility criteria.
If the same individual makes a gift of $480,000, the Period of Ineligibility would be 60 months, or 5 years. In that case, the individual should wait 5 years after the gift before applying for Medicaid. However, if that individual miscalculates the dates and files a Medicaid application after 4 years and 11 months, the individual will not only have gone without Medicaid benefits for 4 years and 11 months, but will also be assessed an additional 5 years of ineligibility due to the gift itself!
Making gifts to qualify for Medicaid is a planning strategy that should never be attempted without the assistance of an experience Elder Law attorney. The rules are simply too complex and the penalties too severe for a “do-it-yourself” project. Only someone having extensive experience with and knowledge of all applicable Medicaid rules and planning strategies can ensure that a “gifting” strategy will not horribly backfire and end up doing more harm than good.
John J. Campbell, Esq.