Medicaid 5-Year Lookback: Exceptions to Protect Assets & Achieve Eligibility in 2023

By Maureen Rulison
Caregiver Support and Resources

Reflecting can be a good thing. But when it comes to the Long-Term Care Medicaid and the 5-year lookback period examining financial eligibility, it’s easy to feel overwhelmed. 

Many of us approaching the twilight of life intend on distributing our assets to loved ones anyways. But the government feels that if those assets are present within 5 years of needing to apply for Long-Term Care Medicaid, they’re fair game to cover the ASTRONOMICAL costs of advanced care.

“What the heck is a lookback period? How is that fair?” you may ask yourself. But it’s just the nature of the beast. A lot of paperwork and lots of red tape are expected for Medicaid, as with any government program. The laws governing it are difficult to comprehend. So we’re here to help.

Medicaid ensures you (and your spouse, if applicable) have not within the last 5 years artificially deflated your financials to achieve eligibility. But there are exceptions! Certain things like meaningful expenditures, gifts, exchanges and transactions can occur within the 5-year lookback period.

Medicaid 5-Year Lookback Exceptions to Keep in Mind in 2023

As you know, your story is told via a paper trail. It’s the government’s due diligence in allowing eligibility for Long-Term Care Medicaid. Simply put, you can’t have significant income and assets — or the state will declare you have the resources to pay for care yourself. 

But Medicaid does understand aging parents, grandparents and other loved ones would distribute wealth and assets in their older years that can’t be used in death. So the exceptions (loopholes, you might say) are there for sound legal and ethical reasons. Experienced estate planning and life-care planning professionals will know to factor these realities. 

1. Home Transfer

Equity in a home is one of the most common gifts to close family late in life and bequests after death. But if you’re planning on gifting a primary residence while still alive, be careful to do so beyond Medicaid 5-year lookback parameters. You may either place the equity in a trust at least 5 years before applying for Long-Term Care Medicaid to be distributed after your death, or you may transfer the property to the following individuals under certain conditions: 

• A legal spouse
• Children under 21 years old
• A blind and/or permanently disabled adult child
• A sibling of the homeowner who has resided in the home for at least a year before the Medicaid applicant transitioned to a long-term care facility
• An adult child of the applicant who has lived in the home for at least two years as a caregiver/care partner before the Medicaid applicant transitioned to a long-term care facility. (The provided care stipulation must be reasonably proven that the adult child providing care delayed the applicant’s need for formal long-term care.)

Of course, Medicaid would require proof of all these familial statuses and other variables to allow eligibility.

2. Married Couples with One Spouse Applying

Quite often, only one spouse applies for Medicaid. While one spouse remains healthy enough to live without assistance, well, the other one sometimes isn’t so fortunate. They must prepare to cover costs for a range of advanced care options – from extra home-care services and respite care to full-fledged nursing home placement. Most people need Medicaid to make that happen.

The Community Spouse Resource Allowance (CSRA) allows the non-applicant spouse to retain much of the couple’s jointly owned assets during the 5-year lookback period while the other still remains eligible.

Here in Florida, there is no penalty for interspousal asset transfers. The CSRA allows the non-applicant (known as a “community spouse”) to keep up to $148,620, while the applicant spouse may keep only $2,000. The thinking, easily enough, is that allowing such asset transfers (including non-residential property, stock portfolios and other investments, and cash savings) to a spouse will protect the applicant’s spouse and other dependent loved ones from having too little to cover living expenses.  

So let’s break down some hypotheticals (updated for 2023):

• If the couple together has $210,000 in net assets, the non-applicant spouse can keep $148,620 and the applicant may retain $2,000. The remaining $59,380 must be spent down or distributed within the rules.
• If the applicant spouse has $250,000 in cash savings alone, (s)he can transfer only $148,620 to the non-applicant and retain $2,000 within the 5-year lookback. 
• If the couple has just $78,000 in net assets, the non-applicant spouse may retain that entire sum.

After these determinations, the remainder of assets during the 5-year period may be used for long-term care costs – regardless of where the care occurs or who administers it.

3. Assets Distributed to Minor Children

Long-Term Care Medicaid applicants may have a minor child or children (under 21 years old), or those who live with any documented disabilities. These children would be eligible to receive asset transfers of any scale  to benefit their own well-being during the 5-year lookback period. 

Life-care planners and legal advisors often recommend establishing trusts to temporarily transfer ownership of funds and assets until the beneficiaries reach adulthood.

These Exceptions to the Medicaid 5-Year Lookback During Your Life-Care Planning

We always advise planning early to ethically and responsibly spend down/distribute assets and property. The best course of action is to have all financial planning and legal issues sorted out well before the lookback, if possible. The exceptions to this important eligibility rule do, however, account for unexpected illnesses and variables that should allow for transactions at any time. 

Professional to help to build a solid plan is recommended, and that is why we are here. Caregiver Support & Resources, LLC works with elder-law attorneys, and we can legally and ethically protect people’s assets to help them qualify for Medicaid and VA attendance. If you need assistance, contact me at maureen@caregiversupportandresources.com.

(Editor’s Note: Caregiver Support and Resources, LLC is not a law office. Maureen Rulison is not an attorney. The information contained in this blog is not to be construed as legal counsel or advice or substituted as such in any U.S. state, territory, locale or foreign state where it can be accessed. Rather, this blog is meant only to educate elders, care partners and families as to legal processes around life care planning.)