People in southeast Wisconsin may plan on one day using government benefits such as Medicaid to pay for their care needs in their old age. However, to qualify for Medicaid and other government benefits, you generally need to have a low income and few assets. It may be tempting to just give away your assets to loved ones or sell them in order to meet the low thresholds necessary to qualify for benefits. However, doing so can violate Medicaid’s “look-back” period.
What is the Medicaid “look-back” period?
When a person applies for Medicaid, any asset transfers made during the past five years are reviewed. If an asset was given away during this time or sold for less than its fair market value, the applicant may not be eligible for benefits until a certain penalty period has passed. This is because these assets, per government rules, should have been used to pay for long-term care instead of being given away or sold for less than their fair market value.
What violates the look-back period may surprise you
Sometimes a person may even violate Medicaid’s look-back rules unintentionally. For example, the Internal Revenue Service (IRS) has an estate and gift tax exemption wherein a person can give another person as much as $15,000 without having to pay taxes on the gift. However, this exemption does not extend to Medicaid and is still subject to the look-back rules.
In addition, it is important to document whether you sold an asset for its fair market value. If there is no documentation for how much you sold an asset for, it may be determined that the sale is in violation of the look-back rules.
Some people may try to put assets in an irrevocable trust in order to qualify for Medicaid while still preserving assets. However, if this trust was executed during the look-back period, it is deemed to be a gift that violates Medicaid’s look-back rules.
While it is possible for relatives to provide care to an aging loved one, such care must be done with proper legal documentation. The lack of a legal caregiver agreement can violate Medicaid’s look-back rules.
Proper Medicaid planning is essential
Ultimately, those in the Milwaukee and Waukesha areas who want to qualify for Medicaid while still preserving their assets may want to seek legal advice, which this post does not provide. There are many rules when it comes to Medicaid qualification. Attorneys in the area understand these rules and may be a useful resource.