What is the Medicaid 5-year look-back?
Anything you transferred in the last 60 months counts. Plan five years out and the family keeps options. Plan one year out and it's already too late.
Medicaid pays for long-term nursing home care for people who qualify financially. To qualify, applicants generally have to spend down to a low asset threshold — typically $2,000 in countable assets, with a few exceptions (a primary residence up to a state equity limit, one car, prepaid funeral, personal effects).
The 5-year look-back is Medicaid's anti-shielding rule. When a person applies for Medicaid long-term care coverage, the state reviews the previous 60 months of financial records. Any transfer of assets for less than fair market value during that period — gifts to children, transfers to trusts, sales below market — triggers a penalty period during which Medicaid will not pay.
The penalty is calculated by dividing the amount transferred by the state's average monthly nursing home cost. Transfer $120,000 to your kids three years before applying, in a state where the average is $10,000 per month, and the penalty is roughly 12 months of Medicaid ineligibility — starting when you would have otherwise qualified. The family pays the nursing home rate during the penalty.
What's exempt from the look-back:
- Transfers to a spouse
- Transfers to a disabled child
- The "caregiver child" exemption — a child who lived in the home and provided care for at least 2 years before the parent moved to a nursing home, in some circumstances
- Transfers to certain trusts for disabled individuals
What people get wrong:
- "I'll just give the kids the money now." Not without triggering the penalty.
- "I'll set up an irrevocable trust." The funding of the trust starts the 5-year clock — and the rules on what kinds of trusts are protected are state-specific and complicated.
- "My parent only has Social Security and a small house — none of this applies." Sometimes true. But the house and any home equity above the state limit can still be a problem.
If long-term Medicaid is even a possibility — meaning your parent has chronic conditions, family history of dementia, or limited assets to begin with — talk to a certified elder law attorney five years before you'd need it. Most planning that protects assets requires the full 60-month runway.
This is one of the few areas in long-term care where waiting is the most expensive choice you can make.