The Willingham Family needs to apply for Medicaid to pay for their grandmother Joanne’s nursing home care.Before doing so, it is important to look at all of her financial transactions during the Medicaid look back period. In the past four years, she has given them monetary gifts, sold her car to her granddaughter for less than market value, and transferred the family home to her oldest son, Byron. Now, however, Joanne needs 24/7 residential nursing home care. She has no option but to apply for Medicaid. She and her family have no idea how Medicaid will view the financial transactions she made during the Medicaid look back period.
A Little About the Medicaid Look Back Period
Medicaid is funded by the federal government but administered by each state. Alabama Medicaid, then, distributes benefit money to Alabama residents. Medicaid programs provide benefits through a variety of programs. We primarily will be looking at Medicaid for elderly or disabled people and residents of nursing homes.
To receive benefits, people must complete applications. They must also meet financial and resource limits. In addition, applicants must provide substantial documentation, including financial records, for the 60 month period before the application date – the Look Back Period.
Medicaid caseworkers thoroughly review an applicant’s financial history during the application process. They are particularly interested in gifts and transfers for less than market value that occurred during the Medicaid Look Back Period which is the 60 months prior to filing the application. What they discover during their review could trigger a penalty period where the applicant cannot receive benefits.
Why Does Medicaid Care About Transfers Made Before You Applied?
Assets transferred during the Look Back Period could have been used to pay for the applicant’s care.
Not All Transactions Were Created Equal.
Some financial transactions are deemed okay by the Medicaid system. Some are not.
These deals may cause problems for the applicant:
Gifts. Taxpayers are allowed to gift money within certain guidelines without facing tax penalties. However, Medicaid typically does not consider gifts exempt.
Irrevocable Trusts. In some cases, assets transferred to irrevocable trusts during the look back period trigger a penalty.
No Documents. Some transactions will be considered in violation of the Look Back Period because of inadequate documentation. The applicant may have to prove that the sale price of a house, for example, falls in line with the market value of the house.
These deals may be allowed:
- Spouses. Transfer to a spouse in most circumstances.
- Disabled Children. Transfers to a blind or disabled child under the age of 21 are usually allowed.
- Deals with Siblings. If an applicant co-owns a home with a sibling if the sibling lived with the applicant for at least one year before applicant applies.
- Adult Children Caregivers. Applicants can give their home to an adult child who is their primary caregiver.
- Payments to creditors are usually allowed. In fact, one way to turn liquid assets into exempt assets is to pay off your mortgage or home equity loan.
Advance Medicaid Planning Can Help.
Planning for Medicaid eligibility can be tricky. Speak with an Alabama attorney and make Medicaid planning part of your estate plan. To learn more, click the link to get a copy of our Alabama Guide to Medicaid Qualification. Doing so could save you thousands of dollars.
For a free consultation with an experienced Alabama attorney, contact us at 256-251-2137 or use our convenient Contact Form. We have offices in Anniston and Birmingham and serve clients in Gadsden, Hoover, Talladega, Vestavia Hills, and surrounding areas.
