Many people believe they can simply give away their assets to qualify for Medicaid. Unfortunately, it is not that simple.
Medicaid has strict rules designed to prevent people from transferring assets solely to qualify for benefits.
The Five-Year Lookback Period
When someone applies for Medicaid for long-term care, the state reviews financial transactions made during the previous five years.
This is known as the Medicaid lookback period.
If the state finds that assets were transferred for less than fair market value during this time, a penalty may apply.
Transfer Penalties
A transfer penalty does not result in a fine. Instead, it creates a period of time during which Medicaid will not pay for nursing home care.
The length of the penalty depends on the value of the assets transferred.
During the penalty period, the individual is responsible for paying for their care privately.
Common Mistakes
Some common mistakes families make include:
- Giving large gifts to children
- Transferring property without understanding Medicaid rules
- Adding children to bank accounts or deeds
Why Professional Advice Matters
Because Medicaid rules are complex, families should seek advice before transferring assets. Planning strategies exist that may help preserve assets while still complying with Medicaid requirements.
