A common worry among many older adults is that they will need nursing home care, and Medicaid will take everything they own. It’s understandable due to Medicaid’s spend-down rule.
Understanding the purpose of Medicaid and how it works will help you and your parents make some financial decisions that ensure they get the care they need when the time comes.
Medicaid’s five-year look-back period
To qualify for Medicaid in Pennsylvania, applicants must meet certain criteria, including strict asset limitations of $2,000. However, it is important to note that not all assets are counted towards this limit.
Certain assets are considered exempt and do not count towards the resource limit. These exemptions include:
- the applicant’s primary residence
- personal belongings
- one vehicle
- burial plots
Additionally, some provisions allow for spousal protections, enabling one spouse to retain a portion of the couple’s joint assets.
One important consideration regarding Medicaid planning in Pennsylvania is the “five-year look-back period.” This refers to a review of an applicant’s financial transactions and transfers of assets within the five years preceding the Medicaid application. Any gifts or sale of assets under fair market value made during this period may result in a penalty period during which the applicant will be ineligible for Medicaid benefits.
It’s important to note that at least one spouse must live in the primary residence for it to be exempt. Or, if there is no spouse, the Medicaid applicant must have an intent to return to the home. Even if the house is exempt, Pennsylvania may be able to recover funds from the sale of the house under the Estate Recovery Program. However, recovery is limited to any part of the estate that is part of the probate process.
Some strategies can be implemented to avoid the Medicaid spend-down rule, such as long-term care insurance or irrevocable trusts, but they take careful planning. You may want to engage the services of someone who can help you navigate the complexities of planning for long-term care so that you can make informed, legal decisions.