Doctor Examining an Elderly Patient

My mother gave me money in 2009.  Now (2013) she is in a nursing home and needs to get Medicaid. Does that money need to go back in her account because of Medicaid’s five-year lookback?

Medicaid is wound tight with very well-intentioned rules to stop people from taking advantage of or “beating the system.” These rules are meant to prevent fraud. Unfortunately, the rules intended to stop outright fraud can sometimes get in the way of those who do play by the rules.

The most common problem families run into is the so-called “lookback” period. You can easily run afoul of the 20/20 hindsight of Medicaid and thereby threaten the care your elderly loved one needs. This common conundrum of the lookback period was recently updated in a Q&A and supporting guide produced by ElderLawAnswers. In fact, the common question that sparked the post is the same as the title: “Should I Return Money My Mom Gave Me So She Isn’t Penalized by Medicaid?

The lookback period, as some know all-too-well, is the period that Medicaid looks back through the finances and tax records of an applicant to ensure that they did not give away their assets to pass muster with the means-testing of the program. Of course, there are plenty of legitimate scenarios in which an individual would want to give away money or assets only to need Medicaid a few years thereafter.

So, what happens when the tripwire is tripped and your loved one is Medicaid ineligible due to a previous gift made during the lookback period?

This may vary from situation to situation (and state to state), but there are ways of undoing the gift and becoming Medicaid eligible. However, there are some potentially strange tax consequences. Then again, the heir who received the gift can always pay for the care until the loved one is eligible for benefits again. Right?

In either event, the best solution would be to not create the problem in the first place. For information on the lookback and other eligibility problems to Medicaid, consult the master post on the subject (see “Medicaid’s Asset Transfer Rules”). As always this is yet another example of situations that require the expertise of competent counsel before making a financial or legal move now (the gift) that can have serious financial or legal consequences later.


For more information on elder law, medicaid, and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.