By: Laura L. Ergood, Esquire
As the US population ages, more people will find they or a loved one need to reside in an Assisted Living (AL) or Skilled Nursing Home (SNH). The monthly costs can be expensive for these living arrangements causing many to wrongly believe they can gift/transfer their assets and apply to Medicaid which will then pay the cost for them. Once a Medicaid application is submitted to the County Board of Social Services, the CBSS will request all of the applicant’s (and their spouse’s) financial records and real estate deeds for the five years preceding the date of the application. This is the dreaded Five Year “Look Back” period. It is the period of time that Medicaid will review all of a couples’ or individual’s assets, bank accounts, investments, purchases and transactions to determine if they have gifted any of their assets in the five years preceding their Medicaid application that would require the imposition of a transfer penalty period.
The Five Year “Look Back” and the transfer penalty periods are different periods of time that should not be confused. The Five Year “Look Back” is the period of time preceding your Medicaid application during which the CBSS will review your records for non-exempt gifts/transfers. The transfer penalty period is the period of time Medicaid will penalize you for those non-exempt gifts/transfers after you are otherwise eligible for Medicaid. This means that once medically & financially eligible for Medicaid (the applicant has only $2,000/$4,000 left), Medicaid will not pay for the AL or SNH for a number of months following the eligibility date. The transfer penalty period is calculated by adding all of the non-exempt gifts made during the Five Year Look Back period and dividing the sum by $7,787 which is the divisor Medicaid has determined equates to the average monthly cost of a skilled nursing facility. This will result in the number of months during which Medicaid will not pay for the AL or SNH.
All non-exempt gifts made within the 5 Year Look Back period will be added together for a total amount of gifts. So gifting of the home, Christmas, graduation, and birthday gifts to children and even loans will add up in those five years.
- Below fair market value transfers may be considered gifts (selling the family home for below fair market value).
- Exempt transfers will NOT trigger a transfer penalty period.
- Transfers/gifts made further back in time outside of the Five Year Look Back period will NOT trigger a penalty period.
To avoid or cure the effects of non-exempt gifts made during the 5 Year Look Back please call my office for assistance. The Law Office of Laura L. Ergood, LLC – 856.266.9525 | Phone – Focusing on Elder Law, Estate Planning & Administration, & Employment Law issues