When you apply for Medicaid for long-term care in either a nursing home or in the community, you are required to provide financial records for the past five years. This is called the “look back” period.
Care and comfort only
The rule of thumb is, you can spend your money on your own care and comfort, but you can’t give it away to qualify for Medicaid.
For instance, if you did any of these things, they are considered acceptable:
- paid off your debts
- made your downstairs lavatory into a full bathroom
- replaced your old clunker with a more reliable car
- prepaid for your funeral expenses
But, if you transferred ownership of your home to your children within the past five years, that would disqualify you from being eligible for Medicaid for a certain period of time called the “penalty period.” And if you really need the help, that would be a time of great uncertainty.
Say your home at the time of the transfer was valued at $240,000 and you paid it off long ago. The state would divide $240,000 by the monthly cost of nursing home care – about $12,000 per month – and you would need to satisfy a penalty period of 20 months before you would be eligible for Medicaid.
That’s the way it is whether you transferred the house yesterday, or one day shy of five years. Conversely, if the transfer occurred at least five years and one day ago, it is not counted as a transfer.
There are many legitimate, legal ways to transfer assets to your heirs and still be eligible for Medicaid if and when the time comes. The best thing you can do to provide for your own needs and still have a legacy is to plan ahead…which means it would be wise to start your planning now.
Medicaid planning is complicated, and the application process is long and tiring. If a nursing facility is in the near future for you or for a loved one, you should come to see us soon. We may be able to help you preserve your money so it doesn’t all go to the nursing home. We may also be able to help you apply and become eligible for Medicaid.
Want to hear more about spending down as it relates to Medicaid? Click here to watch Brendan’s video.
Note: One of the legal ways to transfer assets is if there is a caregiver child involved. Click here to read a story about one of our clients…