The Medicaid Look-Back Period
One area that causes a lot of confusion with regard to Medicaid is the lookback period. Medicaid, unlike Medicare, is a means-based program, which means you are only eligible for it if you have very few assets. The government doesn’t want you to transfer all your assets on Monday in order to qualify for Medicaid on Tuesday, so it has imposed a penalty on people who transfer assets without receiving fair value in return.
Can I Transfer Assets?
To identify who has transferred assets, states require a person applying for Medicaid to disclose all financial transactions they were involved in during the five years before the Medicaid application. This five-year period is known as the “lookback period.” The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during that time.
Any transfer can be scrutinized, no matter how small. There is no exception for charitable giving or gifts to grandchildren. Informal payments to a caregiver may be considered a transfer for less than fair market value if there is no written agreement. Similarly, loans to family members can trigger a penalty period without written documentation. The burden of proof is on the Medicaid applicant to prove that the transfer was not made to qualify for Medicaid.
Look-Back Period Exclusions
Transferring assets to certain recipients won’t trigger a period of Medicaid ineligibility even if the transfers occurred during the lookback period. These exempt recipients include the following:
- A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit)
- A trust for the sole benefit of a blind or disabled child
- A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).
The Look-Back Period and Your Home
In addition, special exceptions apply to the transfer of a home. The Medicaid applicant’s home may be transferred to the individuals above, and the applicant also may freely transfer their home to the following individuals without incurring a transfer penalty:
- A child who is under age 21
- A child who is blind or disabled (the house does not have to be in a trust)
- A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
- A “caretaker child,” who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant’s institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.
If the Arkansas Medicaid program determines that a Medicaid applicant made a transfer for less than fair market value, it will impose a penalty period. This penalty is a timeframe during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines as the average private pay cost of a nursing home in your state.
If you have transferred assets within the past five years and are planning on applying for Medicaid, consult with one of our Arkansas estate planning or elder law attorneys to find out if there are any steps you can take to prevent incurring a penalty.
If you live in Searcy, Benton, Little Rock, Sherwood, AR, or surrounding areas, we can help you qualify for Medicaid without incurring a lookback penalty.
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McClelland Law Firm, P.A. is here to help you and your loved ones understand probate and trust administration, estate planning, Medicaid planning, crisis planning, guardianship, and elder law. Our Benton, Sherwood, and Searcy law offices welcome you to contact us and learn how we can help meet your elder law legal matters in White County, Pulaski County, Saline County, and throughout Arkansas.