Medicaid Trusts and The “Look Back” Period

In addition to providing low-income families and seniors with support for medical care, Medicaid also may pay for the expenses of nursing home care. However, such care generally is only for those with very limited assets (Some assets, such as homes or retirement accounts, may be exempt.)

To qualify for this government support, some seniors have given their assets away. The use of gifts to an irrevocable trust has been popular in this situation.

To curb this practice, the government is entitled to “look back” through the five years before a Medicaid application has been made. Major transfers during these five years may be recaptured to pay for nursing home care before government support kicks in. Alternatively, there may be a penalty period before Medicaid takes over, which amounts to the same thing. If the senior really has no assets, a family member will have to step up to the plate.

Each year up to $14,000 may be given away without incurring a gift tax, the so-called “annual exclusion gift.” This rule, which is enforced by the IRS, has no application in the context of Medicaid. Even annual exclusion gifts are subject to the five-year look back rule.

To learn more about these complex issues, see an elder law attorney who specializes in them.

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