The “5-Year Lookback” Explained

This review of transfers made is known as the 5-year lookback

It is designed to prevent applicants from giving away assets or transferring property for less than fair market value to qualify for benefits.

However, this does not mean families should wait until a crisis to plan. In many cases, advance planning can help to protect assets while still complying with Medicaid rules. The key is understanding which transfers may cause a penalty and which planning strategies may still be available.

If improper transfers are made during the lookback period, Medicaid may impose a penalty period that will be based on the value of the transferred assets and the state’s average cost of care.

The lookback period is one reason it is so important to seek legal guidance before making gifts, moving money, or retitling assets. A transfer that seems simple on the surface can have serious consequences if it is made too close to the time of a Medicaid application or in contemplation of nursing home care.

Planning Strategies and Why Planning Matters

For families facing a current care need, there are still legal strategies including trusts, reallocating resources, converting countable assets into exempt assets, and using a properly structured Medicaid-compliant annuity, where appropriate, to help protect assets. However, without proper planning, a married couple may lose the opportunity to protect significant assets and income.

The right approach will depend on the couple’s income, assets, health needs, and overall goals, and because Medicaid rules are technical and fact-specific, the safest plan is one designed with experienced elder law guidance from Zacharia Brown & Bratkovich.