The look-back period is very different from the penalty period and as always the rules are different depending on whether you are seeking Medicaid to cover the cost of homecare or nursing home care. Conceptually, the look-back period is the period where asset transfers may impact your eligibility for Medicaid. The penalty period is the consequence of transferring such assets. First, I will discuss the rules pertaining to nursing home eligibility followed by the less stringent rules for homecare.
For nursing home eligibility, the look-back period is the sixty (60) month period preceding the date that you enter a nursing home AND apply for Medicaid. For instance, if you enter a nursing home on November 1, 2016 and seek Medicaid eligibility beginning on that date, the look-back period is the period beginning on November 1, 2011 and ending on November 1, 2016. From a practical perspective, this means that the local Medicaid office will require that you submit financial records for this entire period for review. Generally, the local Medicaid office will review all transactions in excess of $3,000.00.
While outside the scope of this writing, it is important to note that for purposes of determining the aggregate value of transfers during the look-back period, not all transfers are subject to the calculation of a penalty. For instance, transfers to spouses are exempt transfers as well as transfers to or for the benefit of a disabled child. There are also certain exempt transfers that can be made when transferring your homestead. If transfers are discovered, they will be aggregated and subjected to the calculation of a penalty period.
The penalty period is calculated by dividing the total amount of transfers by a regional rate and is always represented in months. The regional rate differs by County. By way of example, if you transfer an aggregate of $100,000.00 during the look-back period and the regional rate in your County is approximately $10,000.00, the penalty period will be 10 months ($100,000.00 divided by $10,000.00). This means that Medicaid will not pay for your nursing home for the ten (10) month period beginning on November 1, 2016 and ending on August 31, 2017.
Contrary to what you may hear, Medicaid does not make you retrieve the assets you transferred. Quite frankly, it’s not their problem. They will simply deny coverage for the penalty period. This means that you need to figure out how to pay privately for the nursing home during the penalty period. This could potentially cause a serious financial issue if those assets cannot be made available for your care.
For homecare purposes, there is no look-back period and likewise, no penalty for transferring assets. Assume you seek caregivers to assist with your activities of daily living beginning November 1, 2016. If you transfer your assets in the month of October, leaving you with no more than $14,850.00 in assets, you will be eligible for homecare services beginning November 1, 2016. While the penalty period is somewhat unavoidable, the look-back period must be contemplated in advance. Many of the planning techniques we implement as elder law attorneys involve the transfer of assets, usually to a Medicaid Trust. If you wait too long, you will be caught by the wide cast net of the look-back period ultimately resulting in spending your assets for the cost of care.
As you can see, there are differences between the look-back and penalty periods. Medicaid planning and tax planning is not a “do-it-yourself” project. The assistance of competent counsel practicing in the area of elder law is imperative. It is important to work with a seasoned elder law attorney with Medicaid planning experience. Please phone us at our Rye, NY Office at 914-925-1010 or our Yorktown Heights Office at 914-245-7403 or complete our online Contact Form