How Far Back Can Medicaid Go to Seize Assets to Pay for Long Term Care?

Smart Quiz: How Far Back Can Medicaid Go to Seize Assets to Pay for Long Term Care?

a. 7 years
b. 2 years
c. 5 years
d. 1 year

Answer: 5 years

Advances in medicine have lead to people living longer, but it’s also more likely you or a loved one could end up needing long term care. Even the best insurance only covers limited hospitalization and recovery periods. A major health event requiring long term care can trigger a series of events that can wipe you out financially. To protect your assets from seizure in the event you or a family member need long term care, estate planning must be done at least 5 years in advance.

Why 5 years? Medicare and related supplemental policies have limited coverage for short-term skilled nursing needs, but those programs don’t pay for long term care. The majority of long term care falls onto the shoulders of state Medicaid programs, for those who qualify for Medicaid and Medicare. Medicaid has a five-year lookback period when it comes to assets.

Anything transferred or gifted in the five years before a person passes away may be subject to seizure or penalty. That means if someone gifts or transfers their assets the day before they enter long term care and die in long term care three years later, those assets may be seized or penalized.

Working with an attorney familiar with estate planning is crucial to protecting assets before the need for long term care. They can make recommendations such as:

  • Begin gifting or donating money while still mentally well.
  • Create a life estate to transfer future ownership so that an individual can remain on the property as a life tenant but the property immediately transfers to a remainderman after death.
  • Transfer liquid assets into annuity funds.
  • Create irrevocable trusts and/or pour-over trusts.
  • Guide a community spouse as to how to properly spend countable savings on Medicaid-exempt items such as a home, car, or other household goods.
  • Transfer income to a community spouse

These are just some of the income-sparing techniques available. Most of them can be used at any time, rather than waiting on illness or other medical issues to create a need for action. Call an experienced estate planning attorney sooner rather than later to get more peace of mind when it comes to the financial future.

Thank you to our friends at Financial Health Network for contributing this piece.

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