Planning for long-term care can be overwhelming. Costs begin to add up, and sudden changes in health can leave you feeling anxious or unsure. No one enjoys talking about their elder years and what is to come (unless the grandkids are involved!) but we cannot emphasize enough how important those conversations are. Without proper tools or programs, this process can become extremely stressful. Fortunately, Medicaid is designed to help in these situations.
However, applying for Medicaid requires more than just need: it also requires proper planning, careful recordkeeping, and abiding by your state’s guidelines. Among the most important guidelines is what is known as the Medicaid Five-Year Look-Back Period.
What is the Medicaid Look-Back Period?
Qualifying for Medicaid means meeting the health and financial eligibility criteria defined by New Jersey Medicaid. Being under the income and asset limit defined by the state is required to make you financially eligible for the program. These financial limits ensure that anyone applying for Medicaid is dependent or truly in need of the program for long-term care.
New Jersey
will investigate the applicant’s financial history for the 60 months (5 years) prior to their application date, effectively “looking back” at their records. This is known as the Look-Back Period. This process is used not only to see if applicants are meeting the state’s financial requirements, but to also make sure that applicants are not simply giving away or selling their assets at less than fair market value in order to qualify.
What Types of Transations Are Authorized During the Look-Back Period?
Exempt Financial Transactions. Some ways to give away assets without violating the Five-Year Look-Back Period are through spend downs, home transfers to certain individuals, Medicaid Compliant Annuities or Irrevocable Trusts. These methods can be used to legally and ethically reduce assets and ensure that you are below the financial limit required by New Jersey Medicaid.
Non-Exempt Financial Transactions. A non-exempt transfer, according to Medicaid, occurs when you give away an asset—something of value—without receiving something of equal value in return. Gifts made to family members or selling an asset for a price well below market value are considered non-exempt transfers.
Wait… There Are Penalties?
Yes. If you made a non-exempt transfer, New Jersey Medicaid can find you in violation of the Look-Back Period. This can result in you facing penalties like a period of ineligibility. This penalty period can last months or years, depending on the severity of the violation and the state’s penalty devisor (the average monthly cost of private pay nursing home care in the state).
Strategies to Avoid Medicaid Look-Back Penalties
Proper record keeping of all transactions and long-term planning are ways to avoid violating the Look-Back Period. The best Medicaid plans and applications are done with the help of an experienced attorney—like our attorneys at Giro & Associates, LLC.
To begin spend down, planning, or your application for Medicaid, call our River Edge, New Jersey Law Office at 201-502-7834, or send us a message with a brief description of your situation, and we will get back to you right away.