The Look Back Penalty Period is a concept associated with Medicaid eligibility. So before going into the former, let us first understand the latter.
Medicaid Eligibility in New York
Medicaid is a government program created for low income individuals, such that their nursing home and long-term care costs are covered by Medicaid. So even when you normally can’t afford health care and long term care, the government helps you out.
However, the government must be certain that you can’t afford it before you can be eligible for their help. Hence, they would take a critical look into your assets and past expenses when you apply for Medicaid. Notably, you would only qualify if you have “limited” assets.
So many people will usually look to spend down their assets so that their estate falls below the Medicaid threshold. That is, they would now have limited assets such that qualify them for government assistance.
There are many ways senior citizens can reduce the sizes of their estates. It can be by buying things, but most of them would look to transferring or gifting their assets to their loved ones.
Now this is where the look back penalty period comes in.
The 5-year Look Back Period
To prevent people from simply giving out all their assets to their loved ones and then relying on Medicaid for their health care, the government will penalize you if you have made gifting within the last 5 years before your application.
Your financial history will be reviewed to check if you have transferred any asset for which you received no fair value for. (If you give out a house and then receive money for it, it’s as if you sold it. But if you give out without receiving its cash value in return, then this is gifting, and may disqualify you from Medicaid.)
The 5-year window which your financial history is reviewed is what is referred to as the look back period, or Medicaid look back period. But this is not the look back penalty period. The look back penalty period comes after the Medicaid application.
The look back penalty period in New York
The look back penalty period is the length of time during which you are denied Medicaid benefits as punishment for having gifted out assets during the 5 year look back period.
The look back penalty period in New York varies according to the value of assets gifted. It is calculated by dividing the value of the gifted assets by the New York Monthly penalty divisor, which is $13,834 in 2021. So if you have gifted $27,700 during the 5-year look back period, your penalty period will be 2 months, i.e. $27,700÷$13,834 = 2.
Note that the penalty period varies across states because they each have their penalty divisors.
Exemptions
As with most other things, there are exemptions to this Medicaid look back rule. Not all gifting would attract a penalty.
So what are these exemptions?
· Child caregiver exemption
If you gift a house to your child and this child lives in the house for at least two years while taking care of you, no penalty would be imposed. That is because the gifting is seen as a way for you to enable your child to take care of you rather than depending on the government for your care. This exemption is known as “child caregiver exemption.”
· Special needs trust
A special needs trust is an irrevocable trust created and funded for the benefit of a disabled individual. “Disabled” here is defined under the Social Security Administration rules. So when you transfer assets into such a trust for your child, the assets wouldn’t be counted for Medicaid benefit. The disabled child will therefore also qualify.
· Gifts between spouses
Gifts between spouses are never penalized.
Typically, the total estate of both spouses is collectively counted for the purpose of one spouse’s Medicaid eligibility, so it wouldn’t make sense to regard gifts between them. That’s because whether you leave your asset in your ownership or gift it to your spouse, the asset will remain in the total estate.
Get help from an Elder Law Attorney New York
Having a solid plan in place gives you peace of mind about the future. To ensure you qualify for Medicaid even while leaving assets for your loved ones, contact us for professional assistance from a New York elder law attorney near you.
