There are many myths and misconceptions when it comes to Medicaid. I recently wrote a book titled,” Medicaid and Other Benefits You Don’t Know You Have” in which I discuss 22 of the most common myths and misconceptions. You can purchase a copy of the book online from either Amazon or Barnes & Noble.
Of those myths and misconceptions, there are two which are much more prevalent than the others. First, most people believe you cannot qualify for Medicaid benefits if you own more than $2,000 in assets. This understanding is completely false. I discussed this myth in greater detail in a previous article. Second, most people believe you cannot do any planning or make any transfers within five years before filing a Medicaid application. Again, this is completely false.
Most people incorrectly believe the Medicaid rule says an individual cannot qualify for Medicaid if the person has transferred assets or engaged in any Medicaid planning during the five years preceding his or her application. However, the federal rule creating this five-year lookback period also contains 26 exceptions to the person being ineligible for transferring assets or performing any Medicaid planning during the look-back period. The rule says an individual applying for Medicaid benefits is ineligible for benefits if he or she has transferred any assets during the 60 months preceding the application except for the following. The rule then proceeds to list the 26 exceptions.
The 60-month or five-year lookback period works like a scope rule. When filing a Medicaid application, the applicant needs to know how much historical financial information must accompany the application. At the same time, the Medicaid agency must know how far back it needs to review the applicant’s financial information. The lookback rule tells the Medicaid applicant to furnish financial information to the Medicaid agency for the five years preceding the application. It also limits the Medicaid agency’s review of transfers to the five years preceding the application. If a transfer occurs beyond the five years preceding the application, it gets ignored regardless of the length of ineligibility created by the transfer. If a transfer occurs within the five-year period, the applicant will be ineligible for benefits for a certain period of time unless the transfer qualifies for at least one of the 26 exceptions.
During the entire history of Medicaid, no one has ever been determined ineligible for benefits simply because he or she made a transfer during the five years preceding the application. The lookback rule simply identifies transfers occurring before the application which may create a problem for the applicant. However, the 26 exceptions must be applied to all transfers occurring during the lookback rule to determine if the transfer is excused or is to be considered in the application.
It is important to remember the lookback rule applies to transfers and not countable resources. I had a client who transferred funds to his son and filed a Medicaid application prior to hiring me. Although the client transferred the funds to his son nine years prior to applying for Medicaid, the Medicaid agency still correctly denied his application for benefits. The son held the funds in an account for his father’s benefit. Although they did not have a written trust agreement, their actions and state law created a trust over the funds for the father’s benefit in which the funds were countable resources of the father. The transfer of funds from the father to the son was not a problem since it was beyond the lookback period. However, the problem arose because the son held the funds in such a way to make them countable resources of the father. The lookback rule does not apply to countable resources. The applicant’s countable resources are always considered in a Medicaid application no matter how long ago they were created.
For more information about Medicaid, Medicare, VA benefits, Social Security disability, estate planning and asset planning, visit the website of Senior Resource & Benefits, LLC (“SRB”) at www.srbllc.com call toll-free 1-800-407-9302. All legal services for SRB are provided by the law firm of Riffel, Riffel & Benham, PLLC having a website of www.westoklaw.com and telephone number of 580-234-8447.
