Key Takeaways
- When someone applies for Medicaid to pay for nursing home care, the state reviews asset transfers made during a look-back period, generally five years (60 months) before the application.
- Gifts or transfers for less than fair value during that period can trigger a penalty period during which Medicaid won’t pay for long-term care.
- The penalty is usually based on the amount transferred divided by an average monthly cost of nursing home care set by the state.
- Some transfers are exempt, such as transfers to a spouse or to a disabled child.
- Rules vary by state and are complex; planning should start early and usually involves an elder law attorney.
Why the look-back exists
Medicaid pays for long-term nursing home care for people with limited income and assets. To prevent people from giving away assets just before applying, Medicaid looks back at transfers made in the years before the application.
How the look-back works
- The person applies for Medicaid long-term care coverage.
- The state reviews financial records for the look-back period, generally the previous 60 months.
- Transfers for less than fair market value are identified, such as gifts to children or selling a house to a relative for well below its value.
- A penalty period is calculated, during which Medicaid won’t pay for long-term care.
The penalty generally starts when the person has applied and would otherwise be eligible, which is why poorly timed gifts can leave families with large bills.
How the penalty is calculated
| Step | What happens | Example |
|---|---|---|
| Total the transfers | Add up gifts and below-value transfers in the look-back period | $60,000 given to children |
| Divide by the state’s penalty divisor | The state’s average monthly cost of nursing home care | Divisor of $10,000 per month |
| Result is the penalty period | Months Medicaid won’t pay for long-term care | 6 months without coverage |
The numbers above are only an illustration; each state sets its own divisor.
Common exemptions
Transfers that typically don’t trigger a penalty include:
- Transfers between spouses
- Transfers to a blind or disabled child, or to certain trusts for their benefit
- In some cases, transferring a home to a child who lived there and provided care that kept the parent out of a nursing home
- Transfers that can be shown to have been made for reasons unrelated to qualifying for Medicaid
Planning ahead
- Start early. Planning more than five years before care is needed gives the most options.
- Keep records of gifts and large transactions.
- Make sure powers of attorney allow the agent to handle Medicaid planning if needed; many forms require specific gifting authority. See power of attorney for an elderly parent.
- Get professional advice. Medicaid rules differ by state and change over time.
See also long-term care planning basics.
Frequently asked questions
For nursing home Medicaid, it’s generally five years (60 months) in most states. A few states have different rules, so check your state’s current requirements.
It mainly applies to long-term care Medicaid, such as nursing home coverage and some home and community-based programs, not to most standard Medicaid health coverage.
Transferring a home within the look-back period can trigger a penalty, unless an exemption applies. Get advice before making any transfer.
They can be. Medicaid doesn’t follow the IRS annual gift tax exclusion. Even modest gifts during the look-back period may be reviewed.
No. Assets in a revocable trust are still counted as yours. Some irrevocable trusts are used in Medicaid planning, but they’re subject to the look-back too.
Keep reading
- Caring for Aging Parents: The Legal and Planning ChecklistA practical checklist for adult children helping aging parents: the legal documents to sign, the conversations to have, and how to plan for care and costs.
- Legal Planning After a Dementia DiagnosisAfter a dementia or Alzheimer's diagnosis, there's often still time to sign a power of attorney, will and advance directive. Here's what to do, and in what order.
- How to Talk to Your Parents About Estate PlanningPractical tips and conversation starters for talking to aging parents about wills, powers of attorney and end-of-life wishes, without it feeling like a takeover.
- How to Access a Parent’s Medical Records and Talk to Their DoctorsAdult children don't automatically have access to a parent's medical information. Learn how HIPAA releases, health care POAs and personal representative rules work.
- Long-Term Care Planning: How Families Pay for CareMedicare covers far less long-term care than most people think. Compare how families pay for in-home care, assisted living and nursing homes, and what to plan now.
Don’t leave your family guessing
Put your health care wishes in writing with a living will, HIPAA release and medical authorization. The No Brainer Box adds a last will, a revocable trust and health care and financial powers of attorney.
- Answer a few simple questions online
- Download your completed, ready-to-sign forms
- Sign them and keep copies in your account
This guide is general educational information written by the No Brainer Forms Team. It is not legal advice, and No Brainer Forms is not a law firm. Laws and signing requirements vary by state; for advice about your situation, talk to a licensed attorney in your state.