My mother gave me money in 2009. Now (2013) she is in a nursing home and needs to get Medicaid. Does that money need to go back in her account because of Medicaid's five-year lookback?
By Stephen K. Lehnardt
Medicaid is wound tight with very well-intentioned rules to stop people from taking advantage of or “beating the system.” These rules are meant to prevent fraud. Unfortunately, the rules intended to stop outright fraud many times get in the way of those who do play by the rules. Just like in sports, an unforseen penalty imposed from a look back problem can stop you loved one's participation in this essential financial benefit.
The most common problem families run into is the so-called “lookback” period for “gift” transfers. It is easy to run afoul of the 20/20 hindsight of Medicaid and thereby threaten the care your elderly loved one needs. The common challenge of the lookback period was recently addressed in a Q&A and supporting guide produced by ElderLawAnswers. In fact, the common question that sparked the post is the same as the title: “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?”
The Medicaid lookback period, as some know all-too-well, is the time period that Medicaid looks back through the finances and tax records of an applicant to make sure they do not give away their assets to pass the means-test of the program. Of course, giving away assets is not illegal or a violation of Medicaid law, and there are plenty of legitimate scenarios in which an individual would give away money or assets only to need Medicaid a few years thereafter.
So, what happens when the lookback tripwire is tripped and your loved one is suddenly Medicaid ineligible due to a gift made during the lookback period?
The solution varies from situation to situation (and state to state), but there are ways of undoing gifts to becoming Medicaid eligible again. However, there are some potentially strange tax consequences. Then again, the heir who received the gift can always pay for the care until the loved one is eligible for benefits again. Right?
In either event, the best solution would be to not create the problem in the first place. Your first step can be to review information on the lookback and other eligibility problems to Medicaid, by consulting the “Medicaid's Asset Transfer Rules.” However, this is not something to “go it alone.” Whether you are looking forward, are caught by a lookback problem, or are in crisis mode, Medicaid is a situation that always requires the expertise of competent counsel before making any financial or legal moves (the gift) that can have serious financial or legal consequences later.
For more information in Liberty, MO and the Kansas City Area about Medicaid planning and crisis management, and effective estate planning, and to access free information and tools to organize your estate, visit our estate planning website.
Reference: ElderLawAnswers (mod. January 3, 2014) “Should I Return Money My Mom Gave Me So She Isn't Penalized by Medicaid?”
ElderLawAnswers (mod. September 13, 2013) “Medicaid's Asset Transfer Rules”