Hindsight Is 20/20: Medicaid Coverage and the Five Year Look-Back Period

by David Goldfarb

Nursing homes, assisted-living centers, and similar facilities can cost their residents a lot of money. As a result, many people rely upon Medicaid coverage to pay for long-term care, either for themselves or for loved ones. Medicaid, however, is a form of social welfare designed to help low-income individuals meet their healthcare needs. As a result, Medicaid is available only to income-qualified people.

Perhaps you are planning on gifting or otherwise donating some major assets later in your life. Or maybe you have an adult child with special needs, and youd like to make a sizeable financial gift to provide for his or her future. These are both valid and admirable ways of disposing of your assets, but for estate planning purposes, you need to realize that these gifts could trigger a Medicaid penalty and jeopardize your coverage or that of your loved ones.

Enter the Five Year Look-Back Period

When you apply for Medicaid for long term nursing home care, the government will look at any uncompensated asset transfers within the last five years to determine whether you made them for the purpose of qualifying for Medicaid. To be clear, this applies only to gifts made five years before the date of applications for institutional caregifts made more than five years prior will not be considered.

For gifts made within the five-year period, the agency will not impose a penalty if the applicant can demonstrate that the asset was (1) transferred for fair market value or other valuable consideration (for example, sold for a fair price), or (2) the transfer was made for an exclusive purpose other than to qualify for Medicaid (for example, to realize tax savings or meet educational expenses).

But How Do I Prove That?

You will bear the burden of proving why Medicaid should not penalize you. Thankfully, a number of cases in New York that provide insight and can help you plan accordingly. When reviewing Medicaids determination, a court will look at the following:

  • Documented evidence: receipts, contracts, agreements, and other documents
  • The applicants age and health at the time of the transfer
  • Does the applicant have a history of gift giving?
  • If the transfer was a loan, is there a demonstrated expectation of repayment?
  • Was the sale made to an unrelated third party?
  • The applicants financial situation at the time of the transfer
  • Was the transfer made for a legitimate purpose?
  • The length of time between the transfer and the application for Medicaid
  • Unanticipated changes in circumstances after the transfer but before the application for Medicaid

Rather than having to justify your actions after the fact, careful planning will help you avoid problems with Medicaid coverage altogether.

Consult a New York Elder Law Attorney

The law firm of Goldfarb Abrandt Salzman & Kutzin LLP has helped New Yorkers with their estate planning, as well as Medicaid applications and appeals, for more than 25 years. Our lawyers can give you the guidance you need when planning for your future and the future of your loved ones. To speak with one of our attorneys, call us at (212) 387-8400 or send us an email via our online contact form.