What is the 2019 Alabama Medicaid look back period for long term care in a nursing home?
Continuing our series on Alabama Medicaid in 2019, you are thinking about long term care and how that relates to giving away assets. Because there is a concept under Alabama Medicaid about a “look back” period of 60 months.
Let’s do this:
- Talk about the look back period;
- Purpose of the look back period; and
- How this relates to planning for long term care.
What is the look back period under Alabama Medicaid in 2019?
If you apply for, and are approved for Medicaid to pay for long term care in an nursing home, then we need to know about the look back period.
In 2019 it is 60 months.
Here’s what that means.
Alabama Medicaid looks back in time 60 months (5 years).
Well, what is it looking for?
Looking for any gifts.
What’s a gift?
Any asset you transfer where you don’t get back fair market value.
So if you have a $100,000 piece of land and you give it to your daughter, the gift is $100,000.
If you sell it to her for $25,000, then the gift is $75,000 (100,000 minus 25,000).
Alabama Medicaid is looking for those gifts and it looks back for 60 months.
Why do we even have a look back period — what is the purpose?
The purpose is to make sure Alabama Medicaid is used by those who qualify and follow the rules.
Sometimes when we give away assets, there is a penalty that we must pay.
That’s fine — we often intentionally do this as it makes the most sense. Nothing wrong with doing this as long as you know what you are doing.
But the 60 month look back period is to identify those gifts so Alabama Medicaid can decide if there is any penalty. So we follow this rule to the letter of the law. We don’t try to get around it or expand it — we take the law just as we find it.
How does knowing about the look back period help us to do long term care planning?
It is 60 months from when you qualify and apply for Medicaid. So to some extent, you may be able to control the timing of when you apply.
And if you are healthy right now, you may want to make transfers/gifts as long as you feel you will be ok until that 5 year (60 month) period is over.
We always suggest having a plan for if you need long term care before the 60 months.
Here’s the significance of the 60 month — we’ll use a few examples.
Suppose in May 2012, you gave away $400,000 of assets to your kids.
And now in April 2017, you need long term care in a nursing home.
Would you apply for Alabama Medicaid now in April 2017?
Almost certainly not! Because the 60 months would look back in time to about April of 2012.
What would Alabama Medicaid see?
The gift in May 2012 of $400,000.
So knowing this, if possible you would wait until after long enough after May 2017 so the 60 month period would not include May 2012. You would not want Medicaid to “see” this gift.
This is not wrong or illegal — remember Medicaid set the timing at 60 months. So knowing this, you control when you apply.
NOTE: often it makes good sense to go ahead and apply even though Medicaid will see the gifts. But in this example we would not.
There are lots of factors to consider but hopefully this simple example gives you an idea.
You can read our article which discusses the penalty divisor — in other words, we made a gift, now how will Medicaid penalize us for doing this in the past 60 months.
If you have questions, contact us and we’ll be happy to help you right away.
You can always pick up the phone and call us at 205-879-2447 or fill out our contact form.
Our goal is to help understand where you are right now and then help you see your options to get to where you want to go.
Sometimes that means doing nothing. Sometimes you can take action on your own. And sometimes it makes sense to hire a lawyer.
We’ll help you think through your options so you can make the best decision for your family.
Give us a call today at 205-879-2447 and we’ll be happy to help!
Thank you for your consideration of my question!
If I create an irrevocable trust of my estate (less than $2M), is it considered by Medicaid the same as a gift in your example above, so the 60 month look-back still applies?
In Alabama it will be considered a gift as the trust will not be paying or returning “full fair market value” for the assets put in it.
Normally with an irrevocable trust you put your assets in it.
So its a gift.
Now if you do this for Medicaid planning purposes, you normally have beneficiaries (not you — but kids or someone you trust) who could pull money out and pay your nursing home cost but they have no legal obligation to do this.
So I would be very careful about putting most or all of your money in an irrevocable trust unless you have carefully thought it through.
For the assets to NOT be yours you must truly no longer have control over them. No strings attached so to speak.
If you still control the assets, Medicaid will say they are still yours.
Hope that helps and best wishes!