Protection from Medicaid - The Transfer Penalty and the Look-Back

If you give away your assets it will make you and your spouse ineligible for Medicaid benefits for up to five years. When you apply for benefits, Medicaid reviews five years of bank statements in order to identify any disqualifying transfers. This is known as the “look-back period.” Any transfers that happened before the five year period are protected and do not have to be reported to Medicaid. However, if you apply for benefits during the look-back period, Medicaid imposes one month of ineligibility for approximately every $8,000 you give away. In addition, the clock does not start “ticking” on the ineligibility period until you are in a nursing facility and have spent down your assets. It is impoerative that you involve an attorney familiar wtih Medicaid planning to protect your assets.

The easiest way to explain the transfer rules is by way of an example. Let’s assume Mrs. Smith transfers $24,000 to her grandson on March 15, 2008. On April 15, 2009, Mrs. Smith suffers a stroke and is admitted to a nursing home. Assume she spends down her assets below $2,000 as of August 2009. Because she would be applying during the look-back period, Medicaid would impose three months of ineligibility ($24,000 ÷ $8,000 = 3 months). The transfer penalty would not start until August 1, 2009 and would end in November 2009.