Can someone explain what the 5-year "look back" period for Medicaid is?


Q: The more I read about Medicaid, the more confused I get. Can someone explain how the 5-year "look back" period for Medicaid is related to the $14,000 gift exemption?

A: I am an attorney with 25 years' experience doing Medicaid planning. Let me clear up a few items discussed above:

  1. The $14,000 gift exemption: This figure relates solely to a Federal GIFT TAX exemption and has no relation to Medicaid rules. Anyone concerned with Medicaid coverage will never make anywhere near the $5,450,000 of lifetime gifts permitted before a federal gift tax is due! Thus, for all practical purposes, the $14,000 limit can be ignored for anyone worried about Medicaid.
  2. The 5-Year Lookback: When a person makes a gift of virtually any amount within the 5-year period preceding the date that person applies for Medicaid, those gifts are added together and will result in a disqualification period. The length of the disqualification (or "penalty") period depends on the total amount of the gifts made within the 5-year period and also the penalty divisor of the state where they are applying for Medicaid. A penalty devisor is the average monthly cost of long-term care in the applicant's state. For example, in a state where the penalty divisor is $5,000, if the total gifts made within the lookback period equal $50,000, then the penalty period will be 10 months.

So the bottom line is that there is NO minimum amount a parent can gift their children to avoid the 5-year lookback period. But once 5 years have passed following a particular gift, that gift will no longer count when the person who made the gift applies for Medicaid.

I hope that helps!

K. Gabriel Heiser is an attorney with over 25 years of experience in elder law and estate planning. He is the author of "How to Protect Your Family's Assets from Devastating Nursing Home Costs: Medicaid Secrets," an annually updated practical guide for the layperson.

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