The long-term care benefits offered through Iowa Medicaid are available only to those who have almost no assets and very little income. Officials look not only at what you own now to determine whether you qualify for benefits. They also look at everything you’ve owned for five years before your application date. If you’ve given away property, transferred assets to a trust, or sold property for less than market value, then your eligibility will be delayed.
That is the five-year lookback penalty. If the value of the property you divested puts you over the eligibility limit, then you remain ineligible until the penalty period is over. How can you avoid this problem? Planning ahead gives you the most options, but even in an emergency situation, the team at Huizenga Law can help you avoid problems with the Medicaid five-year lookback penalty.
What to Watch For
Many people are not aware of all the transactions that can trigger the lookback penalty. For instance, payments to caregivers can be treated as gifts if you don’t have proper documentation or the rate is far above market rates. Sales of assets may be viewed as being a prohibited transaction unless you have documentation to prove that the sale amount fit with market rates.
Although the gift tax exemption allows you to give up to $16,000 without penalty for tax purposes, those gifts still count against Medicaid eligibility during the five-year lookback period. In addition, transfers made by a spouse can count against an applicant’s eligibility.
However, there are ways to essentially transfer assets without triggering a penalty. For instance, paying off debt or making modifications to the home, if done correctly, can enable a family to conserve resources without incurring a lookback penalty. It is a good idea to consult a Medicaid attorney before shifting assets in order to ensure that you can benefit properly from the transaction and avoid penalties.
Planning to Come Out Ahead
The ideal planning situation involves developing a strategy years before you anticipate needing nursing home care or long-term care benefits for a family member. At Huizenga Law, we develop custom plans to meet goals while taking advantage of the best available opportunities in your particular situation. Your plan might include:
- An irrevocable trust to hold assets
- Gifts and transfers
- Strategic spending
- Life insurance owned by a loved one
- Funeral trust
- Retitling assets
Because every situation is different, every plan for Medicaid eligibility should be different as well. What worked for someone else six years ago may not be right for your family in the current regulatory and financial climate.
Huizenga Law Can Help You Avoid Lookback Penalties and Look Forward Instead
If Medicaid eligibility rules sound complicated it’s because they are complicated. Some steps will penalize you and cost you thousands of dollars in lost benefits. But if the steps had been taken just a bit differently, they would meet the rule requirements and avoid penalties.
Working with an experienced attorney can make all the difference. The dedicated team at Huizenga Law strives to find the best options for your family at your stage of life so you can all face the future with confidence. To learn more about how you can get long-term care benefits without unnecessary penalties, schedule a consultation with us today.