Most Florida residents considering Medicaid planning measures are aware that Medicaid has a five-year look back period that applies to asset transfers. However, they don’t precisely know how this works, nor how it affects their eligibility for Medicaid benefits.
Before explaining the five-year look back period, though, we first need to explain how Medicaid is different from Medicare. Medicare is a benefit offered to people based on their payroll withholdings — kind of like how Social Security is based off payroll withholdings. Medicaid, on the other hand, is a social welfare system that everyone can apply for, so long as their economic need will qualify them for benefits. Also, with Medicaid, rules and benefits are sometimes different from state to state and even county to county.
Medicaid will finance the long-term care of an individual after his or her finances have dried up. It will not kick in, however, until the person is completely destitute. For this reason, many Florida residents will transfer ownership of their assets — perhaps as a gift to a family member — in order to save part of their wealth for their heirs. This can allow them to quality for Medicaid before they actually spend all of their money on medical bills.
However, gifting away money could trigger the five-year look back penalty associated with Medicaid. The look back period applies to any money given away or transferred within five years of the date of application. For this reason, the earlier the process of giving away funds is started, the better.
Florida residents considering long term care planning and Medicaid planning strategies can discuss their financial needs with an estate planning attorney. A lawyer working in this field will be able to help Florida residents plan their estates in a way that minimizes taxes, penalties and other costs associated with getting older and transferring assets to heirs.
Source: Forbes, “The Medicaid Look Back Period Explained,” Mark Eghrari, accessed Jan. 08, 2016