The look back period is one of the most misunderstood areas of Medicaid. It deals with asset transfers and how this could affect the eligibility of elderly people who are looking for long-term healthcare. To help you understand how the look-back period works, here is an overview with all you need to know.
For elderly persons to qualify for nursing home care, they should prove that they have limited assets and income. While this arrangement was meant to benefit people with genuine cases, there are few who might see it fit to give away their money in order to qualify.
That is why the federal government came up with the look-back period, which is a set of duration prior to when the individual submits an application. In this period, a Medicaid administering agency conducts a review of all financial transactions the senior completed. The applicant may be issued a penalty if the administering agency finds a transaction that violates look back period rules.
A penalty for violating Medicaid look-back includes making the applicant ineligible for Medicaid for a certain period. This period is referred to the penalty period and is determined by the value of transferred assets divided by daily or monthly rate of nursing care (the penalty divider) offered in the state within which the applicant resides.
Although it is permitted by the Federal Government to gift money through gift tax and estate exemption without the need to pay taxes, you should also understand that Medicaid will not exempt such a transaction from the look-back period rules.
You should also not fall for the assumption that an irrevocable trust is not included in a look-back period. A trust falls under legal arrangements and includes the transfer of assets from the grantor to a third party (the trustee), who in turn manages the assets on behalf of the trustee.
When made during the look-back period, irrevocable trusts qualify as gifts and thus violate look back period rules. However, those made before the look-back period are exempt as they are not considered assets.
To help you answer all questions you might have about look-back period rules and penalties, contact us for a comprehensive session with our attorneys who will help you plan better.