Medicaid is a needs-based program that will cover medical costs ranging from a cast on a child’s broken leg to an older adult’s nursing home expenses. If you don’t have the resources to pay for your own medical care, you can ask Medicaid to cover your costs.
New Jersey will look at your current income and what assets you own when deciding your eligibility. Although your house won’t count against you, most everything else could. The state will also look back at your prior financial transactions.
How early do you have to start planning for Medicaid if you want to avoid incurring a penalty when you do apply?
Five years of financial records are subject to scrutiny
Those evaluating your application will request five years of financial records. If you made any gifts or large transfers during that time, those transactions might lead to a Medicaid penalty. Setting up a trust three years before you apply or gifting your children each $10,000 the year before could count against you.
You may not be able to receive benefits until you pay a certain amount on your own, even if you no longer have the resources to cover those expenses. You can wind up going ino debt in a way that will affect your estate. Both Medicaid and medical creditors could come after your remaining assets and even your home after you die.
Planning both to qualify for Medicaid and protect your assets as early as possible will be in your best interests. When you understand how the Medicaid lookback period works, you can make better decisions about planning for future medical needs.