Medicaid, unlike Medicare, is a public benefit program based upon financial need. As a result, you are eligible for Medicaid only if you are over age 65, blind or disabled, and have few assets. If an applicant is married, all assets in the sole name of the husband, in the sole name of the wife, and in joint names either with the spouse or another person (to the extent they are available to either spouse) are pooled together in evaluating Medicaid eligibility. In order to be eligible, individual applicants can have no more than $2,000.00 in assets; eligible couples can have no more than $3,000.00. There are also limits on income.

The government does not allow applicants to transfer all their assets to their adult children, grandchildren or others and then apply for Medicaid.  The goal of the program is to force applicants to use all of their assets first and only then to obtain government assistance through Medicaid. To prevent applicants from transferring or gifting their assets before applying for Medicaid, the state Medicaid agency imposes a penalty on people who transfer assets without receiving fair market value in return. The penalty imposed is a period of Medicaid ineligibility resulting from a transfer of assets for less than fair market value during the look-back period. The length of the penalty period is roughly equal to the number of months that the transferred assets would have paid for care. Penalty periods are not subject to any maximum length.

In order to identify applicants who have transferred assets, states require a person applying for Medicaid to disclose all financial transactions he or she was involved in during the five years before the Medicaid application is filed. This five-year period is known as the “look-back period.” Thus, the “look-back period” is the five year period which Medicaid examines upon the submission of a Medicaid application to determine an applicant’s countable assets, and the disposition of those assets. The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period.

Any transfer can be scrutinized, no matter how small. There is no exception for charitable gifts or gifts to children or grandchildren. Cash payments to a caregiver may be considered a transfer for less than fair market value. Similarly, loans to family members can trigger a penalty period in certain situations. The burden is on the Medicaid applicant to prove that the transfer was not made in order to qualify for Medicaid.

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility even if the transfers occurred during the look-back period. These exempt recipients include the following:

  • Transfers to the spouse
  • Transfers to a trust for the sole benefit of the spouse
  • Transfers from the spouse to a trust for the sole benefit of the spouse
  • Transfers to a blind or disabled child
  • Transfers to a trust for the sole benefit of a blind or disabled child
  • Transfers to a trust for the sole benefit of a disabled person under age 65
  • Transfers to a trust established by a non-profit association for a disabled person under age 65
  • Transfers for a purpose other than to qualify for Medicaid.

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:

  • The applicant’s spouse
  • A child who is under age 21, or who is blind or disabled
  • Into a trust for the sole benefit of a disabled individual under age 65
  • A sibling who has lived in the home during the year preceding the applicant’s institutionalization and who already holds an equity interest in the home
  • A “caretaker child” who is defined as a son or daughter who was residing in the individual’s home for a period of at least two (2) years immediately prior to admission to a care facility, and who has provided care to such individual which permitted the individual to reside at home rather than in an institution or facility. Such care must have exceeded normal personal support activities and must have been essential to the health and safety of the individual and consisted of such activities as supervision of medication, monitoring of nutritional status, and ensuring the safety of the individual.

If the state Medicaid agency determines that a Medicaid applicant made a transfer for less than fair market value, it will impose a penalty period. This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average monthly private pay cost of a nursing home in your state. For example, the average monthly cost of nursing home care in New Jersey as determined by the state Medicaid agency is $9,535. Therefore, if a Medicaid applicant gifted $100,000.00 to his or her child during the 5 year look-back period, the resulting penalty would be 10.49 months of ineligibility for Medicaid, beginning in the month in which the Medicaid application was filed.

If you have transferred assets within the past five years and are planning on applying for Medicaid, consult with a Certified Elder Law Attorney (CELA) to find out the steps you can take to prevent incurring a penalty.

For additional information concerning Medicaid and public benefits planning, visit:

(This blog post was adapted from an article on the ElderLawAnswers website. Mr. Vanarelli is a founding member of ElderLawAnswers.)