Medicaid has an asset limit. If you own assets above this limit, you often do not qualify for Medicaid.
Before you run out and sell off your assets to qualify, you should know about Medicaid’s look-back period. The look-back period starts the date of your Medicaid application and looks back at your asset transfers for the past five years.
When you submit your Medicaid application, the Medicaid agency examines asset transfers during this five-year period that were gifted to someone else or sold for less than fair market value.
The reasoning behind the look-back period
The purpose of the look-back period is to verify that you did not intentionally sell your assets for little to no profit just so you could qualify for Medicaid. The idea is that if you have assets or the financial means to pay for long-term care, you should use those financial resources to pay for the care before relying on Medicaid.
An example of a sale that could violate the look-back period is selling your home to a family member for half of its current fair market value.
You may still be subject to the look-back period after you qualify and start receiving Medicaid. If you receive an asset or large sum of money, such as an inheritance, and give it all away, you could be subject to a penalty.
Exceptions to the look-back period
There are some exceptions to the look-back rule. You can generally transfer an asset to a permanently disabled or legally blind child or transfer a home to a child who is under the age of 21.
You can also transfer assets to your spouse if they are not applying for Medicaid, although here is a limit to how many assets a non-applicant spouse can keep.
If you want to qualify for Medicaid but have too many assets, there are proper ways to potentially spend down assets without violating the look-back period. However, the look-back period can be rather complicated, so it is best to consult with a professional.