One of the questions I am frequently asked in my elder law practice is “what is the five-year lookback?”
Simply put, if you give away money or property during the five years before you apply for Medicaid, that transfer triggers a penalty period during which you are ineligible for Medicaid.
How Does the Penalty Period Work?
The penalty period is calculated by dividing the amount you have gifted or transferred by the average cost of nursing home care in our area, as published yearly.
The 2011 Nassau and Suffolk County average nursing home cost is $11,445.00
So, for example, if you give $91,560 to family members, at $11,445 a month you wouldn’t qualify for Medicaid for eight months. If you give your home to your children, and retain a life estate, you have also given a gift, the fair market value which is countable towards the transfer penalty.
When Does the Penalty Period Start?
The Penalty period starts the day you apply for Medicaid. New York State will review the Medicaid application to see if any gifts or transfers for less than fair market value are made for the five years prior to the application. In other words, the full five years must pass before the gift is protected. The penalty period does NOT start on the day you transfer the assets.
What Happens After Five Years?
If you need nursing home care, you will be eligible for Medicaid at the end of the five years after the transfer, as long as you have no other unprotected assets. Contacting an elder lawyer while you are still well enough to transfer assets into an irrevocable trust is essential.