Questions & Answers
The following are common
legal questions, as well as helpful
answers. If you still have questions, please give us a
today at 877-699-6841,
or send an email to
firstname.lastname@example.org to set up a
What is the “Lookback Period”?
Medicaid looks back 60 months from the date of a Medicaid
application to determine whether you have made any gifts. The
lookback period is only an audit period during which time
Medicaid has the right to review all of the financial records
of the applicant (and the spouse of the applicant, if
Am I Ineligible For Medicaid If I Have Transferred Assets
Within The Lookback Period?
Whether a period of ineligibility applies depends on the
amount and date of the gift, the identity of the recipient,
and the type of Medicaid benefit you seek. Transfers to
spouses and disabled children are not subject to a penalty and
additional exceptions may apply if the applicant transferred
his or her residence.
The transfer penalty is
only for nursing home care and the LTHHC (“Long Term Home
Health Care”) Program. The transfer penalty can be shorter or
longer than 60 months. There is no transfer penalty for
Medicaid home care.
Are Gifts Under $12,000 Excluded from the Medicaid Transfer
A gift of under $12,000 is subject to the Medicaid transfer
penalty rules for nursing home care and the Long Term Home
Health Care program even though the gift is excluded for
federal gift tax purposes.
Do Gifts in Excess of $12,000 Require a Gift Tax Payment?
Gifts in excess of $12,000 are subject to Federal gift tax,
but the amount of the gift will be offset by the $1,000,000
Federal gift tax exclusion. Therefore, no gift tax is actually
due unless the donor’s total lifetime gifts exceed $1,000,000.
Are Life Insurance Proceeds Tax-Free?
Generally, the receipts of life insurance proceeds are income
tax free but not estate tax free. Proper planning can be
undertaken, however, so that life insurance proceeds are also
estate tax free. For example, an Irrevocable Insurance Trust
can be utilized.
Should I have a Durable Power of Attorney?
It is advisable to have a Durable Power of Attorney if you
have at least one person whom you trust implicitly who is also
willing to manage your financial affairs in the event you
become incapacitated. If you become incapacitated and you have
not executed a proper Durable Power of Attorney, a costly
guardianship proceeding would likely be necessary to obtain
authority from the court to manage your affairs.
Do Revocable Trusts Avoid Estate Taxes?
A Revocable Trust does not avoid estate taxes although it may
avoid the probate process. The Trust assets will be part of
the grantor’s estate for estate tax purposes. However, married
couples can save estate taxes by having Revocable Trusts which
contain a Credit Shelter Trust (also known as a By-Pass
Can Revocable Trusts Protect Assets from Medicaid?
A Revocable Trust does not protect assets from Medicaid and
the nursing home. The Trust assets are considered available
for the purpose of determining Medicaid eligibility. Creditors
such as a nursing home can also make a claim against the Trust
assets. Only a properly drafted Irrevocable Trust will protect
the assets from Medicaid and the nursing home.
Is Estate Planning Necessary For Individuals With Under
$1,000,000 In Assets?
Everyone should implement estate and long term care planning
to protect one’s assets and to preserve one’s dignity. A
Durable Power of Attorney with Health Care Proxy and Living
Will can ensure ongoing decision making in the event of a
disability. Wills and Trusts can ensure a proper disposition
of your assets at the time of your death.
Long Term Care Planning can
protect your assets from Medicaid and the nursing home. There
are also Federal and State income tax issues which affect
people with under $1,000,000 that should be addressed (for
example, IRA distributions, basis rules, and capital gains on
the sale of a residence).
Interested in learning more?
to download a free estate planning brochure.