Dear Clients and Friends:
Assets that are transferred into a Medicaid trust are all subject to the five-year lookback. All means all, as pointed out by this question and my response:
Our elderly (82), frail, unmarried cousin with vascular dementia has been using her funds to pay for a live-in aide 24/7 (she refused to go to assisted living). Recently, after transferring her remaining non-IRA funds and home to an irrevocable Grantor trust, and her monthly income to a Pooled Income Trust, she was approved for Medicaid in-home care. We are still in the process of getting her assessed to determine the number of hours of care Medicaid will pay for. It is my opinion, however, that she is going to need a nursing home by year’s end…definitely, before the 5-year look-back period is up. I understand the calculation to determine the penalty Medicaid will apply, but how does the house get treated? Does Medicaid assign it a monetary value at the time it went into the trust (and then include that in the calculation along with the monies that got transferred)? Please explain. Thank you.
The questioner here got it right. All assets transferred into the trust are subject to the five-year look-back. If a transfer is caught within the look-back (a transfer within five years of you being in a nursing home and applying for Medicaid), then a penalty is assessed based upon the value of the assets transferred and this definitely includes the fair market value of any real estate (less any mortgage).
At this point, the trust is funded for your cousin and we don’t know how things will play out (although you can guess). If she eventually must go to a nursing home, we can assess our options at that time.
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Lawrence Eric Davidow