The Five Year Lookback
The five year lookback for Medicaid is a much feared and misunderstood rule. Very simply, it means the State of Connecticut Department of Social Services is going to look back for a period of five years to see what you did with your assets. The State wants to determine if you made transfers of your assets to your family that could disqualify you from getting state homecare programs, or Medicaid. It does not automatically mean you cannot do any transfers, because there are many exceptions to the rules.
First, there are no restrictions on transfers between husband and wife. Any and all assets can be transferred between spouses, even if one of them is already in a nursing home. The state is still going to look back and see that transfer, but there won’t be any penalty because of it.
Second, the state looks at all records of financial or real estate assets. That includes bank accounts, CD’s, brokerage accounts, IRA’s 401K’s, 403B’s, stocks, US and corporate bonds, annuities, life insurance policies and real estate. It also includes accounts if you are only a partial owner. Everything! It is a real pain getting those records, but the state is entitled to them and will require them. It includes all statements, monthly, quarterly or annually, that is provided to the account holder.
Third, the state then goes through the records to see if you gave anything away. There are many special rules that may allow transfers. The spouse exception was already mentioned. Another example is giving money or other assets to a disabled child. But you shouldn’t rush off and do that without competent advice, as the disability must be proven, and you want to make sure the disabled child will not be disqualified from any programs he or she is on.
Another exception is transfer of an interest in a house to a brother or sister, if the brother or sister also owned part of the house and lived there for at least one year prior to the transfer.
There is also a general rule that says the transfer will not result in a penalty if it was done for a reason “other than to qualify” for Medicaid. This is not a rule that permits easy gifting, because it is very strictly applied. An example might be a healthy, relatively young grandparent, paying some tuition for a grandchild, and then getting into a debilitating car accident. You cannot count on this rule saving you from a penalty, however, because of the extremely strict interpretation taken by the state.
Another example is a “caretaker child” who lives with a parent for at least two years and gives daily care to the parent, without which care the parent would have been in a nursing home. We see many examples of this every year, and the house, and possibly other assets can be transferred to the child, even though it is within the five year lookback.
The important thing to remember is that the five year lookback does not mean planning and transfers cannot be done within that time. It may be entirely possible to save some or all of your assets, including the home, at the last minute. Seek competent advice.