When a senior applies for long-term care Medicaid, whether that be services in one’s home, an assisted living residence, or a nursing home, there is an asset (resource) limit. To be eligible for Medicaid, one cannot have assets greater than the limit. Medicaid’s Look-Back Period is meant to prevent Medicaid applicants from gifting assets, including selling them under fair market value, to meet Medicaid’s asset limit.
All asset transfers within the Look-Back Period are reviewed by the Medicaid agency. This includes transfers made by an applicant’s spouse. If the Look-Back Rule has been violated, a Penalty Period of Medicaid ineligibility will be established. This is because had the assets not been outright gifted or sold under their fair market value, they could have been used to pay for the elderly individual’s long-term care. Note that assets transferred prior to the Look-Back Period are not penalized.
The Look-Back Period begins the date of one’s Medicaid application for long-term care. Generally speaking, the “look back” is 60-months (5 years). As an example, a Florida resident applies for Medicaid on Jan. 1, 2024; their Look-Back Period extends back to Dec. 31, 2018. All financial transactions between these dates are subject to review.
Examples of transactions that violate the Look-Back Period and could result in penalization include the following: Money gifted to a granddaughter for her high school graduation, a house transferred to a nephew, collectors’ coins sold for half their value, and a vehicle donated to a local charity. Additionally, payments made to a personal care assistant without a formal Personal Care Agreement can violate the Look-Back Period.
Even after the “initial” Look-Back Period, if a Medicaid beneficiary comes into some money, say for example, via an inheritance, and gives all (or some) of the money away, they are in violation of the Look-Back Rule. This means that despite an initial determination that one has not violated the 60-month Look-Back Period and is receiving long-term care Medicaid, they can violate this rule, and hence, be disqualified from Medicaid benefits.
The American Council on Aging now offers a free, quick and easy Medicaid Eligibility Test for seniors.
Medicaid offers a variety of programs and the Look-Back Period does not apply to all of them. This article is focused on elderly care and Medicaid benefits for long-term care. These programs consider the Medicaid Look-Back Period. If one is applying for Nursing Home Medicaid or for a Home and Community Based Services (HCBS) Medicaid Waiver, the state’s Medicaid governing agency will look into past asset transfers.
The Look-Back Rule does not apply to the Regular Medicaid program. Relevant to the elderly, this is often called Aged, Blind and Disabled Medicaid.
While the federal government establishes basic parameters for the Medicaid program, each state sets their own rules within these parameters. This means all 50 states do not have the same rules for their Medicaid programs, nor do they have the same rules for their Look-Back Period.
In 2024, there are only two exceptions to the 60-month “look back”. California is one exception, and while the state has a much more lenient Look-Back Period of 30-months (2.5 years), it is currently being phased out altogether. By July of 2026, there will be no Look-Back Period. Furthermore, CA’s “look back” only applies to Nursing Home Medicaid. New York is the other exception, and while the state has a 60-month “look back” for Nursing Home Medicaid, there currently is no “look back” for Community Medicaid, the program through which state residents receive long-term home and community based services. The state, however, plans to implement a 30-month Look-Back Period sometime in 2025 for this program.
The “Penalty Divisor”, which is used to calculate the Penalty Period for violating the Look-Back Rule, also varies by state. It is tied to the average cost of nursing home care in one’s state. A state may use a daily and/or monthly Penalty Divisor. See state-specific Penalty Divisors. There is no limit to the length of the Penalty Period.
An exception to the Look-Back Rule for small gifts might be made in some states. For instance, Pennsylvania allows Medicaid applicants to gift as much as $500 / month without violating Medicaid’s “look back”.
The Look-Back Period is complicated, especially since the rules that govern it vary by state. It is recommended one contact a Professional Medicaid Planner to learn more about state-specific rules.
IRS Gift Tax Exemption – The IRS allows an annual Estate and Gift Tax Exemption. In 2024, an individual in the U.S. can gift up to $18,000 per recipient without reporting it to the IRS (filing a Gift Tax Return). This federal Gift Tax Exemption does not extend to Medicaid’s rules. Gifting under this exemption violates the Medicaid Look-Back Rule.
Lack of Documentation – Not having sales documentation for assets sold during the Look-Back Period can result in a violation of Medicaid’s Look-Back Rule. While the assets may have been sold for fair market value, if documentation is not available to provide proof, it may be determined the Look-Back Period was violated. This is particularly relevant for assets, such as automobiles, motorcycles, and boats, that have to be registered with a government authority.
Irrevocable Trusts (also called Medicaid Qualifying Trusts) – One might assume that these trusts are exempt from Medicaid’s Look-Back Period, but this is not always true. The term, Medicaid Qualifying Trust, can create confusion, as the name suggests it is used to qualify for Medicaid. Unfortunately, if the trust was created during the Look-Back Period, it is considered a gift, and therefore, a violation of this rule. In simple terms, a Medicaid Qualifying Trust is a legal arrangement where assets are transferred from an individual, called the grantor, to a third party, called the trustee. The trustee becomes the owner of the assets and holds them for the named beneficiary. A variety of assets can be transferred via a trust and may include a Certificate of Deposit (CD), stocks, property, cash, and annuities. The term, irrevocable, means that the grantor cannot change or cancel the terms of the trust.
Paying a Family Member to Provide Care – While it is acceptable under Medicaid rules to pay family members for providing care, doing so without proper legal documentation and Caregiver Agreements is a very common cause of Medicaid penalties. More information is provided below on how to do this without breaking Medicaid’s rules.
There are several exceptions and loopholes to Medicaid’s Look-Back Rule. These exceptions allow asset transfers without fear of a Penalty Period. To ensure they are done correctly and to avoid penalization, it is highly recommended one consult with a Medicaid Planning Professional prior to transferring assets.
Joint Assets of a Married Couple
Assets can be transferred to a non-applicant spouse. For Medicaid eligibility purposes, all assets of a married couple are considered jointly owned, regardless of in whose name the asset is in. All of these assets are calculated towards the asset eligibility of the applicant spouse. The non-applicant spouse, however, (community spouse) is allocated a larger portion of the couple’s assets in order to prevent spousal impoverishment. This is called the Community Spouse Resource Allowance (CSRA), and in 2024, allows the non-applicant to keep as much as $154,140 of the couple’s combined assets. The federal government sets this maximum figure, and states may elect to use a lower figure. For example, South Carolina has a maximum CSRA of $66,480, and Illinois, $129,084. This is an oversimplified explanation here; calculating the CSRA is much more complicated. Learn more here.
Asset Transfers to Children who are Disabled or Blind
Asset transfers for the benefit of one’s child(ren), given they are permanently disabled or legally blind, can be made. This includes the establishment of trusts.
Asset Transfer of a Home
In addition to being able to transfer one’s home to their permanently disabled or legally blind child (of any age), one can transfer their home to their child who is under the age of 21. The home can also be transferred to a sibling if they are part owner of the home and lived there a minimum of one year immediately prior to the Medicaid applicant’s nursing home admission. This is called the Sibling Exception. There is also a Caregiver Child Exemption, which allows one’s home to be transferred to an adult child who served as a caregiver for their parent(s). The adult child must have been the primary caregiver of their aging parent(s) for a minimum of 2 years immediately preceding the parent(s) relocation to a nursing home or assisted living residence. The adult child must have lived in the home and provided a level of care that prevented them from having to relocate to one of these facilities.
If one has violated Medicaid’s Look-Back Period, it is still possible to gain Medicaid eligibility. Usually the best course of action is to work with a Professional Medicaid Planner. This is a precarious situation, and if not handled correctly, will result in a Penalty Period.
Free initial consultations with Medicaid Planning Professionals are available. Get started here.Asset Recuperation
If one can recuperate the gifted assets, the penalization period will be reconsidered. Therefore, if there has been any violation of the Look-Back Period, it is extremely important to try to recover all assets. In some states, all assets transferred must be recuperated or the penalization period will remain the same. Other states might allow for partial recuperation of assets and adjust the Penalty Period accordingly.
Undue Hardship Waiver
If one has tried to recover gifted assets, but were not able to do so, they can apply for an Undue Hardship Waiver. The Medicaid applicant must prove recuperation of assets failed, and if not granted Medicaid benefits, they will face significant hardship. This means they won’t be able to provide food, clothing, or shelter for themselves. It is very hard to be granted an Undue Hardship Waiver unless it is very clear that the individual will suffer significant hardship without it.
There are ways for one to spend down “excess” countable assets without violating Medicaid’s Look-Back Period. While the following strategies are all options, the Look-Back Rule is extremely complicated. Therefore, it is highly recommended one contact a Professional Medicaid Planner prior to using one of the following strategies.
Life Care Agreements
Life Care Agreements, also called Caregiver Agreements or Elder Care Agreements, are a great way for seniors who require a caregiver to spend down extra assets without violating Medicaid’s Look-Back Period. In simple terms, Caregiver Agreements, which generally last for the duration of the care recipient’s life, are legal contracts between a caregiver, often a relative or close friend, and an elderly individual who requires care. Often Life Care Agreements remain in effect even after the senior care recipient moves into a nursing home, as the caregiver can serve an advocate role for the senior. The contract needs to include the date care services are to begin, the type of care that will be provided, such as personal care assistance, light housecleaning, and preparation of meals, the frequency / hours the care will be provided, and the rate of pay. The pay rate must be reasonable for the area in which one lives. If it is not, it may violate the Look-Back Period. Life Care Agreements should make it very clear that payments to a caregiver are not gifts. It is best to have supportive documentation, such as a log of executed caregiving duties, the days and number of hours worked, and written invoices for payment.
Medicaid Exempt Annuities
Medicaid Exempt Annuities, sometimes called Medicaid Compliant Annuities, are another way one can spend down assets without violating Medicaid’s Look-Back Period. Annuities convert a lump sum of cash into a monthly income stream for the Medicaid applicant or their spouse. This effectively lowers one’s countable assets for Medicaid eligibility. Annuity payments can be for the duration of the recipient’s life or for a set period. Each state has its own rules for Medicaid Compliant Annuities; not all annuities are Medicaid compliant. Deferred annuities, in which payments are delayed until a future date, violate Medicaid’s Look-Back Period. When considering an annuity, one must proceed with caution.
Paying Off Debt
Paying off debt, such as a mortgage or credit cards, does not violate Medicaid’s Look-Back Period and effectively lowers one’s countable assets.
Home Modifications
Assets can be used for home modifications and reparations without violating the Look-Back period. This includes replacing old plumbing systems, updating electrical panels, adding first floor bedrooms and / or bathrooms, installing wheelchair ramps, chair lifts, widening doorways to allow wheelchair access, and replacing carpet with more wheelchair friendly surfaces.
Irrevocable Funeral Trusts
Irrevocable Funeral Trusts, which pay for funeral and burial costs in advance, provide a way to spend down excess assets without violating Medicaid’s Look-Back Rule. The term, “irrevocable”, meaning the trust cannot be changed or terminated, is extremely important, as funeral trusts that are revocable violate the Look-Back Rule. Furthermore, many states set a limit to the amount that can be used to fund an Irrevocable Funeral Trust.