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A popular question that I answer a lot for my estate planning clients is what is the Medicaid look-back period for assets?  When clients realize they might be eligible for Medicaid, they start their estate planning with that in mind.  However, the timing of everything for Medicaid planning is of the utmost importance. 

Most people do know of the two federal programs, Medicare and Medicaid.  A quick refresher: Medicare is a federal health insurance program for people aged 65 and older (and certain younger people with disabilities). Medicaid provides health coverage to eligible low-income adults, children, elderly adults and people with disabilities. 

The most common scenario that I see is that a client’s biggest asset is their house and they want to know the options on what they can do to qualify for Medicaid.  A lot of people think they can transfer ownership of the house and then they will have no assets and they will qualify.  That is not entirely the case.  And the reason for that is the Medicaid look-back period.

The reason why there is a Medicaid look-back period is to try and stem fraud.  The federal government doesn’t want you to transfer all of your assets one week and then the next week be deemed eligible. 

How does the look-back period work? In order to determine if you qualify for Medicaid, they require you to disclose all financial transactions during the five years before the Medicaid application.  At this point, they will determine if any assets were transferred for under fair market value.  So, you can’t just transfer ownership of your house to a family member for $1 because that would not be deemed fair market value. 

Regarding real estate, there are a few scenarios that are deemed to be ok that won’t be scrutinized, even if they happen within the five-year period.  You can transfer the real estate to: 

  • A trust for a disabled child or a disabled individual under age 65
  • A child who is under age 21
  • A sibling who has lived in the home and who already holds an equity interest in the home
  • A caretaker child who is a child who lived in the house for at least two years prior to the application

If you have any questions regarding Medicare, Medicaid, or completing your estate plan please contact us.  Obviously, time is of the utmost importance in situations like these.