Medicaid Planning in North Carolina and the Look Back Period Penalties For Gifts to Your Children

Medicaid for nursing home care can destroy a family'scomputed based on the size of the gift.
savings. Paying $6,000 to $10,000 per month or morePenalties depend on each state's rules. In North
for care will leave you and your family broke in no timeCarolina, there is a one month penalty for each $5,000
at all.gifted. All gifts during the preceding 5 years are added
To qualify for Medicaid for nursing home care in Northtogether, then divided by $5,000. The resulting number
Carolina, an applicant must meet certain income, assetis the waiting period for benefits. For example, if you
and medical need tests. Many times, the applicant isgift $50,000 to a child, that creates a 10 month period
ineligible for assistance because of past gifts thatof ineligibility.
were made during the "look back" period under federalAny gifts within the past five years will create a period
and state law.of ineligibility for benefits. If the applicant applies for
When a person has excess assets, one option hasbenefits before the look-back period expires, then the
been to transfer money and property to trusts or topenalty will start only when the applicant:
other family members to reduce countable assets.- actually applies for nursing home benefits
This type of Medicaid planning is still possible under the- has assets below the allowed amount ($2,000 of
new rules, but now it needs to be done further incountable assets for a single person, more allowed for
advance.a married person)
Recent changes to the law resulted from the Deficit- is in a nursing home
Reduction Act that went into law February 8, 2006.In other words, under the new rules you can find
North Carolina implemented the DRA effectiveyourself out of money and still ineligible for Medicaid
November 1, 2007. There is now a five-year look-backbenefits in the nursing home, unless you get good legal
period for gifts to individuals or trusts. Some peopleadvice and plan ahead the right way. Making gifts is still
think that means the "Medicaid penalty" is also fivepossible, but you should talk to an expert first.
years. Actually, the total amount transferred during theThe best time to plan is five years before a nursing
last five years determines the length of the waitinghome stay is needed. This type of estate planning for
period, or a penalty, for benefits.Medicaid allows you to protect your assets and your
Many people confuse the penalty and the lookbackfamily. You should consult with a lawyer who knows
period. The government only considers gifts madethe ins and outs of good Medicaid planning and how
during the lookback period, which is the five yearsthe look back penalty affects you. You need to make
immediately prior to the application for benefits. If giftssure that you can get the care you need and not
were made during that time, then a penalty isleave your family broke.