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Understanding the Medicaid 'look-back period' in New Jersey

Many people in East Hanover may anticipate that eventually they will need nursing home care. Some of these people are relying on Medicaid benefits to cover the costs of a nursing home, which can be substantial. However, in order to qualify for such a benefit for nursing home care, there is a limit to how much a beneficiary can have in property and income.

Some people may be tempted to just give friends and relatives expensive gifts of cash and other property in an effort to lower their income and assets so they can qualify for Medicaid. However, this strategy can backfire due to the Medicaid "look-back period." Simply put, this is the length of time before a person applies for Medicaid in which the government will go over any financial transactions the person had made. If a particular transaction breaks the look-back rules, then the person may be penalized. In general, the penalties increase how long the person is ineligible for Medicaid.

Items included in the look-back period include money, automobiles and collectibles, such as pieces of art. If a person gives the item to another person as a gift or if they sell the item and receive less than what the fair market value of the item is, they may be penalized. The rationale behind this is that the person should have used those assets to pay for nursing home care rather than just giving them away.

The look-back period in the state of New Jersey, and in every other state but California, is five years. The clock on the look-back period starts ticking on the day that the person submits their application for Medicaid. So, for example, if a person applied for Medicaid on June 1, 2017, the look-back period would then commence, going back five years to June 1, 2012.

Having a look-back period along with the penalties involved may seem unfair. The good news is that there are many exceptions to the look-back period in which a person can give an item away and not be penalized. However, applying these exceptions can be complicated. Therefore, a person who is applying for Medicaid but is concerned about the look-back period may want to work with an attorney who can explain the applicable laws and regulations. This way the person can make informed decisions during the Medicaid planning process.

Source: Paying for Senior Care, "What is the Medicaid Look-Back Period? What Penalties, Exemptions & Workarounds Exist?," Sept. 2016

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