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What is the 5 Year Rule for Medicaid?

Attorney Thomas B. Burton answers the following question:

"What is the 5 Year Rule for Medicaid?"

Attorney Thomas B. Burton discusses the 5 year rule for Medicaid and how the Medicaid look back period works for asset protection and Medicaid planning in the state of Wisconsin.

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Hello, I'm Attorney Thomas Burton and today's question is the following:

“What is the five-year rule for Medicaid?”

This is a good question and one that I see come up frequently in my estate planning practice. And generally, when people ask about the five-year rule, what they're referring to is the five year look-back period that Medicaid imposes for anyone to successfully apply and receive Medicaid long-term care payment services.

What I mean by that is when you go to apply for Medicaid, you must meet both an asset and an income test. Generally, for a single individual, you're allowed to have no more than $2,000 in liquid assets. Think about cash type assets in your bank account and you can have a home, one vehicle and personal property and qualify for Medicaid and there's other ways certain asset exemption levels you should work with your attorney, talk about maximizing those.

But in general, for a single individual, $2,000 in liquid assets.

The other thing Medicaid looks at is the past five years. Have you made any gifts or what Medicaid cost divestments in the five years preceding the date of application for Medicaid assistance, and this is what we call, the five year look-back period.

So for example, if you gave a child $5,000 as a check, a check for $5,000, 3 years ago, that would fall within the five-year Medicaid look back period. So if you think you may need long-term assistance Medicaid assistance, you cannot gift away all your assets in the five years before you apply and be below that level to qualify. Now, you can use the money on legitimate reasons such as improving your house, making repairs, your health maintenance and welfare, but Medicaid does not want to provide an incentive to folks to gift away their money during life, in order to qualify for Medicaid long-term care services.

So if you want to do Medicaid planning, the best way to do it is advanced planning and there’re ways you can gift assets to irrevocable trust and be able to use those assets. But you need to do it ahead of the 5 year look-back period, so in advance and then the trust owns those assets instead of you individually, but the thing to be aware of is that five-year period before you apply, you do not want to be making gifts because Medicaid will ask for your bank records and they will look through them and they will find those gifts.

When I work with a client for Medicaid planning, I always tell them we want to disclose everything under Medicaid application because it's a crime, if you leave anything off of there and even if you just forget something, Medicaid is going to probably think you're trying to hide it. So the best thing is full disclosure on the Medicaid application. As a reminder, you can do Medicaid planning, but you need to do it in advanced.

Now, there are some techniques we use in emergency type Medicaid planning situations and they're more complex than I can get into in this video. But if you're in that situation, contact me or another elder law attorney and we'll do what we can but the best thing is advance planning, which would be 5 years ahead of the date you think, you may need the long-term care.

If you're interested in how this type of trust can work, I've created a free five step guide on how to protect your home from the nursing home and I'll put the link to that in this video. You can just click the link. It'll take you to my website. You enter your email and the guide will be sent to your inbox. But in general great question about the five-year look-back period for Medicaid and thank you for asking.

© 2020 Burton Law LLC. All Rights Reserved. Transcript and captions provided for ease of access for the hearing impaired. For questions about this topic, or to suggest a topic for a future blog post, please contact the office.

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