Medicaid is a federal financial assistance program that gives aid to low-income individuals, elderly adults, and those with disabilities. Particularly for seniors, because long-term/nursing home care can be so expensive (in Texas, an average of $6,000 or more per month!), Medicaid is the only way that many could feasibly pay for an assisted living facility.
However, there is a catch – anyone who applies for Medicaid has to fall below a certain income/resource threshold, in terms of how much money they have, in order to qualify. In Texas, individuals who apply must have monthly income under $2,742 and assets under $2,000 (in general). This is set up this way so that well-off, wealthy people who have the means to pay for care themselves are not taking government resources away from those who can’t afford it.
You may be wondering if you qualify for Medicaid, what steps you have to take to apply, and what else you need to know about the process and the program. One of the most important things that seniors need to be aware of when it comes to Medicaid planning is something known as a “look-back period”. If you have done any amount of research on Medicaid, you may have heard this term, but it can be confusing! Let’s take a closer look at what the look-back period for Medicaid is and what it means for you.
The Look-Back Period, Explained
The Centers for Medicare and Medicaid Services (CMS), in order to prevent seniors who are above the resource limit from being able to qualify, set up a system for reviewing all applicants’ financial histories. When someone applies for Medicaid, there is a certain time frame where their financial transactions are closely examined – this is the look-back period.
How long the look-back period for Medicaid is is slightly different in every state. In Texas, this period is 5 years, or 60 months, from the date someone applies. You will have to provide extensive documentation and access to your financial records for the past 5 years when you apply.
Consequences Of Violating Look-Back Rules
Any asset transfers made during these 5 years could potentially count against you and jeapordize your eligibility. While there are certain exceptions (discussed below), in the vast majority of situations, if your money changed hands during the look-back period, you will likely be penalized and unable to qualify for or receive Medicaid benefits until the penalty period has passed.
Examples of common things you wouldn’t think violate the look-back rules, but that do, include:
- Giving money to your niece or granddaughter for their high school graduation or wedding
- Selling a vehicle to a local charity for half its value
- Paying an in-home nurse or personal care assistant without a formal agreement (or paying a neighbor to run errands, or paying a cleaning service without a formal agreement, etc.)
- Selling your boat for cash without documentation
- Setting up an irrevocable trust and transferring real estate into it
- Gifting a large sum of money to your adult children
Exceptions To Look-Back Rules
There are some types of asset transfers that you can make without fear of them counting against you when you go to apply.
Any gifts or transfers of money to your spouse will not impose a penalty on you, no matter when they were made or how much they were for (provided your spouse isn’t applying at the same time you are). All assets of married couples are considered jointly owned by the CMS, regardless of if they are held separately or listed in only one spouse’s name.
Any gifts or transfers of money to children under the age of 21, or to children who are disabled/legally blind, will not penalize you either, no matter how large the gift is or whether it involved the creation of a trust. (Note that for disabled children, you want to be particularly careful with how you gift assets to them because while you won’t be penalized, they may be later on due to their now higher resource amount.)
Finally, there are two formal exceptions to the look-back period for Medicaid known as the Sibling Exception and Caregiver Child Exception. If your sibling partially owns your house, and lived there for at least one year prior to your admission to a nursing home, you can transfer the home to them without incurring a penalty. If your adult child served as your primary caregiver for at least two years prior to your admission to a nursing home, and lived in your home, then you can transfer the home to them without incurring a penalty.
If you are planning to make any of these transfers, it’s highly recommended that you work with an attorney to ensure that the process goes smoothly and that you don’t make mistakes that will disqualify you from aid.
What To Do If You’ve Missed The Look-Back Period Or Violated The Look-Back Period Unknowingly
Many seniors find themselves in a tough position of not having enough to afford nursing home care, but having too much in terms of assets to qualify for Medicaid. That’s why it is in your best interests to plan far in advance and structure your assets before the look-back period begins so penalties don’t affect your status! However, if you were unaware of the look-back period, or you have already missed it and need to enter a nursing home now, or if you violated it without realizing it and are facing penalties, you may have some options, including having the assets returned or filing an Undue Hardship Waiver.
A Texas Medicaid planning professional can help you understand what to do next. At The Law Office of Michelle E. Murphy, we’ve been assisting seniors and their families with various Medicaid issues – including the look-back period – for over 20 years, and our compassionate, knowledgeable guidance can help you find both peace of mind and the best possible way forward. Let us handle the complicated process and paperwork while you relax and focus on your family! Call today to schedule a free consultation and learn more.