By Lisa Hostetler Brown, Managing Attorney, LawyerLisa – Upstate Elder Law
The 5-year Medicaid lookback period is one of the most important—and often misunderstood—aspects of elder law planning. When applying for Medicaid long-term care benefits, the government carefully reviews financial transactions made during the five years prior to the application date.
This period, known as the “lookback,” is designed to prevent individuals from giving away or transferring assets solely to qualify for Medicaid assistance. Any transfers or gifts made during this timeframe can trigger a penalty period, which delays the start of Medicaid benefits. This delay can last months or even years, depending on the value of the assets transferred, leaving applicants responsible for the full cost of their care during that time.
Strategic Planning with the Lookback
With proper planning well ahead of time, the 5-year lookback can be used strategically to protect your assets while ensuring eligibility for Medicaid when needed. One effective method is to place assets into an irrevocable trust more than five years before applying for benefits.
Unlike revocable trusts, which can be altered or revoked by the grantor at any time, irrevocable trusts remove ownership of the assets from the individual, effectively making those assets “invisible” to Medicaid. Because Medicaid only considers assets you own or control at the time of application, funds placed in a properly structured irrevocable trust established outside the 5-year lookback period will not count against your eligibility.
Choosing a Trustee
It’s crucial to understand that you cannot serve as the trustee of your own irrevocable trust; doing so would mean you retain control over the assets, and Medicaid would count them against you for eligibility purposes. Instead, you must appoint a trusted and responsible third party—such as a family member or a close friend—to manage the trust’s assets on your behalf. This trustee will oversee the funds according to both the terms of the trust and what will be in your best interest.
Why Early Planning Matters
Starting the planning process early is essential. Waiting until care is urgently needed or a Medicaid application is imminent severely limits your options and may result in unnecessary financial penalties and reduced benefits.
By planning ahead, you not only protect your assets but also maintain more control over your care choices and preserve your legacy.
In Summary
The 5-year Medicaid lookback is a safeguard against improper asset transfers, but it also provides a clear window for strategic planning. With foresight and guidance from an elder law attorney, you can ensure your assets are protected, your eligibility is preserved, and your care options are maximized when the time comes.
