I Gifted $50,000 Within the Past 5 years, How Would I Figure Out How Long the Medicaid Penalty Would Be?
To figure out the penalty for violating Medicaid’s look back rule (more detail is below), you must know the average monthly private cost of nursing home care in the state in which you reside. (This is called a penalty divisor). As an example, let’s say that the average cost of such care is $5,000 / month. You gifted $50,000, and therefore, must take this amount and divide it by $5,000, which equals a penalty period of 10 months ($50,000 ÷ $5,000 = 10 months). Stated differently, the penalty period is 10 months, as had you not gifted $50,000, you would have been able to pay your long term care costs for 10 months.
The penalty period is based on the amount gifted and the monthly cost of privately paid nursing home care in the state in which one resides, as mentioned above. (Please note that some states may use a daily penalty divisor rather than a monthly penalty divisor). In some states, the penalty period is longer than in others, even with the exact same amount of assets gifted. (This is because the average cost of privately paid nursing home care is not consistent across the states). To be clear, there is no limit to the length of one’s penalty period, and during this timeframe, an individual, or their family, will have to cover the cost of needed long term care. However, if a Medicaid applicant is able to recoup all of the gifted assets, the penalty period may be lifted. Furthermore, in some states, even recouping part of the gifted assets can reduce the length of the penalty.
There are some exceptions to the Medicaid look back period, or put differently, there are some asset transfers that can be made without resulting in a penalty. One is the child caregiver exemption, in which a Medicaid applicant’s home can be transferred to an adult child if he / she was his / her parent’s live-in caregiver for a minimum of two years, delaying the inevitable need for assisted living or nursing home care. Learn about other exceptions here.
If you have violated the look back period, or are looking for ways you might reduce the penalty period, it is advised that you contact a professional Medicaid planner for assistance.