The Listen to Lawrence Letter: Medicaid 5 year look-back – Do we need to keep all canceled checks?

May 24, 2021
Today’s question is a perfect example of the need to get specific with topics that I’ve already talked about. Although most people ask general questions, which is absolutely fine, once in a while it’s good to get a simple, targeted question.
For example, a lot of you may already know what the Medicaid look-back period is but you may not know all the ins and outs of how it works and you really should, so read on for the answer to a very good, specific question.
Hi Lawrence. Thanks for these posts, they are very helpful. On the subject of the 5 yr. look back….we aren’t sure what to save and what we can discard. Do we need to save all of our canceled checks?
The technical answer is that Medicaid has the right to ask for everything within the look-back period. That is every bank statement, brokerage statement, any other financial statement, and certainly every check. They can also question every expenditure and ask for backup.  Remember, any check or expenditure during the look-back that benefits someone else ( a gift ) will be added together and then a penalty will be assessed.
However, let’s get practical. Our experience is that each examiner, depending upon how busy they are, will pick a threshold for documentation. For example, they may ask for all checks that were $1000 or $2000 or $3000 or more. Usually, we advise you to at least keep every check of $1000 or more.
Medicaid will not only look for your checks but also the backup receipts for these checks. If for example, you wrote a check for $2000 to repaint a couple of rooms in your house, they may ask for the receipt from the painter, showing it was your house and not your daughter’s house that was painted.
Likewise, if they see a check to pay off a Citibank credit card bill for $4000, they may ask for the credit card statement to see what you put on that credit card. If it turns out that you paid for a couple of weeks of summer camp for your grandson, this may also be considered a gift for Medicaid purposes.
Lastly, Medicaid is even more info needy with respect to trusts. EVERY CHECK from a trust, regardless of amount, will be scrutinized by Medicaid. Here they are looking to see if even $1 was used for the benefit of the grantor, contrary to the terms of the trust. If they find such a dollar, the whole trust may be invalidated.
The bottom line: use your common sense and keep and organize your documentation, erring on the side of keeping more.
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