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What is the Five-Year Medicaid Look Back Rule?

The struggle to pay for nursing home care can put a family between a rock and a hard place. According to Met Life’s 2010 Survey of Long Term Care Costs, the average cost of a private room in a North Carolina nursing home is $204 per day – that’s almost $75,000 a year!

For a family that has saved diligently and invested wisely, paying for care out-of-pocket can quickly deplete resources and derail retirement planning and estate planning goals. On the other hand, in order to qualify for Medicaid, an applicant has to fall below certain income and asset requirements. Without careful planning, a similar depletion of assets can occur.

In order to get around Medicaid eligibility rules and keep assets in the family, many people try to give their excess assets to their children or grandchildren before applying for benefits. Due to Medicaid’s five-year “look back” rule, this can be a mistake with serious consequences. Here’s how it works:

When you apply for Medicaid benefits, the program “looks back” a period of five years.  If you made gifts during the five years prior to your application in an effort to reduce your net worth and qualify for Medicaid, then your eligibility for benefits will be delayed. The length of the delay is determined by the value of the assets transferred during the look back period.  North Carolina assesses a one-month delay for every $5,000 worth of assets transferred.

So, if you gifted $50,000 to your son two years before applying for Medicaid, and then you gifted an additional $10,000 to your granddaughter one year before submitting your application, your eligibility to have Medicaid pay for your nursing home care would be delayed by 12 months.

As you can see, Medicaid rules are very specific, and failure to follow them can lead to life-altering consequences for you and your family. The five-year look back rule does not mean that Medicaid planning is not possible. It does mean that your best bet is to plan ahead, and to get the help of an experienced estate planning attorney.

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