Any financial transactions made during the five years before application, known as the “look-back period,” could potentially delay Medicaid eligibility. Fortunately, some exceptions to the rules could help families receive benefits more quickly.
How to Spend or Transfer Money During the Medicaid Look-Back Period
Applicants can transfer certain assets to family members and other parties at any time without incurring a penalty. Some of the most common ways to spend down assets during the look-back period include:
- Transfers to spouses. In many cases, one spouse will apply for Medicaid while the other will continue to live in the family home. The federal government limits the amount the applicant can transfer to the healthy spouse, called the Community Spouse Resource Allowance (CSRA). In 2022, the maximum CSRA was $137,400 (the exact dollar amount changes each year). Any additional assets must be spent on Medicaid-compliant costs.
- Paying off debts. Money spent on debts isn’t the same as money given to family members. Applicants can pay off considerably large debts—including a mortgage, loan, or home equity line of credit—without incurring penalties. They may also spend money on home modifications or out-of-pocket medical costs without penalties if these costs are related to the applicant’s disability.
- Transfers to a child who is blind or disabled. Applicants may establish trusts or transfer assets into trusts for disabled or legally-blind children under the age of 21.
- Transferring your home to a sibling. You can transfer your home to a sister or brother as long as they legally own a portion of the house and have lived there for at least one year before the applicant is placed in a nursing home.
- Medicaid Exempt Annuities. Also called Medicaid Compliant Annuities, these allow applicants with a large amount of cash to create Medicaid-exempt income. The applicant uses a lump sum to purchase an annuity that disburses monthly payments to the applicant or their spouse for the rest of that person’s life. You can buy an annuity during the look-back period without incurring a penalty.
- Transfers to Child Caregivers. Medicaid’s Child Caregiver Exemption allows applicants to transfer their home to their adult child without penalty. To qualify, the adult child receiving the house must have lived with the Medicaid applicant(s) for a minimum of two years before the application date and serve as a primary caregiver to the parent.
- Funeral Trusts. An irrevocable funeral trust sets money aside for the sole purpose of funeral and burial costs. While the total amount allowable in these trusts is limited, they can be used to provide for the applicant and their spouse.
How an Attorney Can Help You Get Medicaid Without Sacrificing Your Life Savings
Medicaid rules and the strategies used to meet them are incredibly complex—and both of them change regularly. You should also be aware of the state-specific practices regarding Medicaid benefits. For example, New York’s requirements for transferring assets under fair market value only extend to applicants entering nursing home care. An applicant receiving home health care services (also called community care) could potentially retain a greater portion of assets to leave to heirs.
It’s always a good idea to speak with a Medicaid planning lawyer before initiating any transfers. If you need Medicaid benefits to pay for long-term care for yourself or someone you love, the elder law attorneys at Landskind & Ricaforte Law Group, P.C. can help you make the best plan for the future. Contact us today through our online form or call us at (718) 333-5007 to get started.