Medicaid is intended to give long-term medical care to people who need it. Unlike Medicare, Medicaid is a means-based program, which means a person may only be eligible if they have few assets. The program begins where a person's funds and other assets end. You're expected to pay for your own long-term care on your own until you can no longer pay, and then Medicaid takes over.
When you consider the possibility of expensive long-term care, you may be concerned about losing your house or other assets in the course of applying. Transferring assets to your spouse, children, or various types of trusts may be ways to protect your assets, however, Medicaid has something called a “look-back period” that you need to know about before you transfer anything.
Five Year Look-Back
If you begin transferring assets right before you apply for Medicaid, you will be subject to a five-year review of all your assets. Countable assets transferred within five years of your application date will be subject to penalty periods, while those transferred prior to the five-year period will not.
Asset transfers made by your spouse can also result in a five-year Medicaid penalty period. Medicaid sees these as assets that could have been used to help cover your long-term care costs if they were not transferred or gifted by your spouse.
Your House and Medicaid
There are special rules regarding your house during the five-year period. Medicaid will not require your home to be sold for your care if it is:
- Occupied by you and/or your spouse
- Does not exceed a certain value, which can vary depending on your state
- Owned by you and/or your spouse's
You should be aware, however, that you can't gift your house outright without a penalty, except under certain conditions. For example, you can transfer your home without penalty to:
- Your spouse
- Your child who is under 21, blind, or permanently and totally disabled
- A son or daughter other than previously described, who has lived in the home for the previous two years and provided you with care that allowed you to stay in your home when you would not have otherwise been able to stay in your own home
- Your sibling who has an equity interest in the home and lives in the home at least one year before you are institutionalized
In some cases, Medicaid may put a lien on the home to recover the cost of your long-term care after your death.
What This May Mean for You
If you transfer assets during the five-year lookback period, you will be ruled ineligible for Medicaid for a period of time since the assets could have been used to pay for your care. While there are exceptions like the ones listed above, “spending down assets” must be done carefully to avoid triggering a penalty or other ineligibility. An attorney who handles Medicaid planning can help you avoid potential pitfalls during your application and planning process. It should be noted that, although Medicaid penalty periods can be assessed when transferring assets within the five-year lookback period, that does not necessarily mean that transferring assets that result in a penalty period should be avoided in all situations.
Experienced elder law attorneys will often time intentionally make transfers that result in a penalty period. This is often done when a family is facing immediate long term care needs. By carefully designing a plan and strategically transferring assets, knowing that it will cause a penalty period, elder law attorneys are often able to use the penalty period, along with the asset transfer and an income stream, in order to preserve assets that would have otherwise needed to be spent on long term care expenses. This planning becomes more complex and should be coordinated by an experienced elder law attorney, but when done properly, intentionally incurring a penalty period can sometimes save families tens or even hundreds of thousands of dollars in long term care expenses.
Frequently Asked Questions (FAQs)
1. What is the Medicaid Lookback Period?
The Medicaid Lookback Period is a five-year retrospective review conducted by Medicaid of all your assets and transactions. If you've transferred countable assets within this five-year timeframe before your Medicaid application date, you could be subject to penalty periods. However, assets transferred before this period will not be penalized.
2. Can the transfer of assets by my spouse affect my Medicaid eligibility?
Yes, asset transfers made by your spouse can affect your Medicaid eligibility. Medicaid perceives these transfers as assets that could have been utilized to cover your long-term care costs. These transfers can potentially result in a five-year penalty period.
3. How does Medicaid treat my house during the Lookback Period?
During the Lookback Period, Medicaid does not require you to sell your home for your care under specific conditions. However, if you gift your house, except under certain conditions, it could result in a penalty. In some cases, Medicaid may place a lien on the home to recover the cost of your long-term care after your death.
4. What happens if I transfer assets during the Lookback Period?
Transferring assets during the Lookback Period can make you ineligible for Medicaid for a certain period. This is because those assets could have been used to pay for your care. However, there are exceptions and strategies, like spending down assets carefully to avoid triggering penalties or other ineligibility. Consulting with an experienced elder law attorney during your application and planning process is recommended.
5. What is a Medicaid penalty period and when can it be useful?
A Medicaid penalty period is a time during which you are ineligible for Medicaid benefits due to asset transfers made within the Lookback Period. Experienced elder law attorneys sometimes intentionally make transfers that result in a penalty period when a family is facing immediate long-term care needs. Through carefully designing a plan and strategically transferring assets, attorneys can often use the penalty period to preserve assets that would otherwise have been spent on long-term care expenses.
Prepare for Medicaid with an Attorney
The earlier you can get your affairs in order, the smoother your transition will be. For all questions regarding elder law and Medicaid planning, speak with a reputable attorney with Heritage Law Office of Wisconsin. We are dedicated to providing you with the knowledge to properly handle elder laws and prepare for long-term care. Contact our office at (414) 253-8500 for a free case evaluation today!
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