Medicaid Planning 2026 - "The Five-Year Look Back" Period

Attorney RJ Connelly III Certified Elder Law Attorney Professional Fiduciary

"Securing long-term care for loved ones is a complex journey, often marked by emotional and financial uncertainty," stated professional fiduciary and certified elder law Attorney RJ Connelly III. "Medicaid plays a critical role in making such care accessible to millions of Americans, especially when the costs of nursing home or in-home care exceed what families can afford. Yet Medicaid’s eligibility criteria are complex and often misunderstood. Among the most consequential aspects is the “Five-Year Look Back” period—a rule whose implications demand careful attention from any family embarking on Medicaid planning. With sound guidance, however, families can avoid pitfalls and protect their assets. In today's blog, we take a comprehensive look at this Medicaid Rule."

Understanding Medicaid’s Five-Year Look-Back Period

The Five-Year Look Back period is a federal regulation designed to discourage individuals from transferring or giving away assets simply to qualify for Medicaid long-term care benefits. In essence, it allows the state to examine an applicant’s financial history to determine whether any transfers were made for less than fair market value during a specific review window immediately preceding the application for benefits.

When an individual applies for Medicaid to cover nursing home or certain in-home long-term care services, the state Medicaid agency reviews all financial transactions from the preceding five years (or 60 months) for most applicants. In some states and situations, this review may be more extensive, depending on asset titling and whether trusts or business interests are involved. The goal is to form a clear picture of the applicant’s true financial situation.

This review encompasses not only obvious cash gifts, but also a broad range of transfers and financial arrangements, including:

Outright gifts of money to family members or friends, whether large or small, are outside the scope of ordinary, modest holiday or birthday gifts.

Transfers of real estate, such as adding a child’s name to a deed, transferring the home entirely to someone else for little or no payment, or selling property for less than its fair market value.

Transfers of vehicles and other titled property, including cars, boats, or recreational vehicles, that are sold or gifted below market value.

Transfers of investment or financial accounts, such as moving funds into another person’s name, creating joint accounts with disproportionate contributions, or assigning beneficiary rights in a way that effectively removes the applicant’s access to the funds.

Funding or restructuring of certain trusts, particularly if assets are moved into an irrevocable trust or other vehicle that restricts the applicant’s access to those assets during the look-back window.

Forgiveness of loans or informal arrangements, such as “loans” to children that were never documented or repaid, which may be treated as gifts if there is no written agreement or repayment schedule.

Even seemingly innocuous or well-intentioned gifts—such as helping a grandchild with a down payment on a first home, contributing to a grandchild’s college tuition, or making generous charitable donations—can attract scrutiny during this audit if they occurred within the five-year window and are not clearly part of a long-standing pattern of modest giving.

Remember, Medicaid is not assessing the moral worth of these gifts; instead, it is determining whether the transfers were made when the individual could reasonably have anticipated the need for long-term care and might have been attempting to reduce countable assets to meet eligibility thresholds.

The Application Process

As part of the application process, individuals (or their legal representatives) must produce extensive financial documentation covering this five-year period. Commonly requested records include, but are not limited to:

Bank and credit union statements for all accounts, including checking, savings, money market, and CDs, often cover the full 60-month period.

Investment and retirement account statements, such as brokerage accounts, IRAs, 401(k)s, pensions, and annuities, along with documentation of withdrawals, rollovers, and beneficiary designations.

Tax returns (federal and state), including supporting schedules, to help verify income, assets, and any claimed deductions.

Property records, including deeds, closing statements, market valuations, and any transfer documents for the primary residence, vacation homes, rental properties, or vacant land.

Vehicle titles and transfer records for cars, trucks, boats, RVs, and other titled property, especially if ownership changed hands during the look-back period.

Insurance policies, such as life insurance (especially those with cash value), long-term care insurance, and any policy that can be surrendered or borrowed against, together with records of loans, surrenders, or beneficiary changes.

Business-related documents, if the applicant owns or has owned an interest in a business, including partnership agreements, corporate records, buy-sell agreements, and sale or transfer documents.

Documentation of significant deposits or withdrawals, including explanations and supporting paperwork for large or unusual transactions—for example, a substantial cash withdrawal, the sale of a major asset, or a large deposit from an unexplained source.

Records of gifts or transfers, such as canceled checks, wire confirmations, letters of explanation, or written loan agreements, can help clarify the nature and purpose of a transaction.

Many applicants are surprised by the level of detail required, particularly if their financial affairs have been handled informally over the years. However, from Medicaid's perspective, this level of documentation is necessary to evaluate whether any disqualifying transfers occurred and to confirm that the applicant’s current financial picture is complete and accurate. Transparency is paramount. Incomplete, inconsistent, or inaccurate records can:

Delay the application process, as the agency may request additional information or clarification, which could delay the start date of benefits.

Trigger closer scrutiny, leading reviewers to question whether the applicant is attempting to conceal assets or transactions.

Result in a denial of benefits, if the agency determines that assets were not properly disclosed, documentation is insufficient, or unexplained transfers suggest disqualifying gifts.

Misrepresentation

Intentional misrepresentation or concealment of assets can carry serious consequences far beyond a simple denial of benefits. These may include lengthy ineligibility periods, substantial financial penalties, and, in extreme cases, formal allegations of fraud that may lead to legal action. Given the high stakes, it is vital to approach the Medicaid application process with complete honesty and meticulous attention to detail.

Applicants should be prepared to disclose all relevant financial information, including bank accounts, property interests, gifts, and transfers, and to provide documentation that supports each disclosure. Whenever possible, it is wise to seek guidance from professionals such as an elder law attorney experienced in Medicaid, who understands both the letter and the spirit of the Five-Year Look Back rules and can help families avoid unintentional mistakes.

By starting early to organize financial records, gather statements and documentation for major transactions, and keep clear written explanations for any significant movement of funds, families put themselves in a much stronger position. Creating a simple timeline of gifts, asset transfers, and large withdrawals can make it easier to answer questions that may arise during the review process. In addition, seeking knowledgeable advice before making substantial gifts or transferring property, whether to children, other relatives, or into trusts, can help ensure that these decisions are made with a full understanding of how they may affect future Medicaid eligibility. Taken together, these proactive steps enable families to navigate the Five-Year Look Back period with greater confidence, reduce the risk of unexpected penalties, and preserve access to care and financial stability at a time when both are most urgently needed.

Consequences of Violating the Look Back Rule

If the state Medicaid agency uncovers asset transfers for less than fair market value during the look-back window, it will impose a penalty period. This penalty is not a monetary fine, but rather a period of ineligibility for Medicaid long-term care benefits. During this time, the applicant is responsible for paying the full cost of care out of pocket—a significant financial burden for most families.

The length of the penalty period is calculated by dividing the total value of assets improperly transferred by the average monthly cost of nursing home care in the applicant’s state. For instance, if $60,000 was gifted to a relative within the look-back period and the state’s average monthly cost of care is $6,000, the applicant incurs a 10-month penalty period. This means Medicaid will not cover long-term care for 10 months, and alternative payment sources must be identified.

These penalties can be devastating, particularly when care is needed immediately due to a sudden illness or decline in health. Families often find themselves scrambling to cover costs, risking depletion of retirement savings, investments, or even the family home.

Case Study: The Johnson Family’s Experience

Mary Johnson, a retired teacher, prided herself on helping her family. A few years before her health declined, she gave her grandchildren a total of $40,000 to help pay for college tuition. At the time, she was healthy and had no idea this generosity could later affect her Medicaid eligibility.

As Mary entered her late seventies, her health deteriorated quickly. Memory issues, repeated falls, and difficulty managing medications made it unsafe for her to live alone. Her daughter, Yvette, stepped in as primary caregiver but soon found that the level of care Mary needed was more than she could safely provide at home. On her doctor’s recommendation, Mary was admitted to a nursing facility.

Because the cost of care far exceeded Mary’s income and remaining savings, Yvette applied for Medicaid on her mother’s behalf. As part of the review, the Medicaid agency examined five years of Mary’s financial records—the standard look-back period for long-term care benefits.

In doing so, the agency discovered the $40,000 in tuition gifts made to the grandchildren during that five-year window. Because these were considered transfers for less than fair market value, they triggered a penalty period. Using the state’s average monthly cost of care, the $40,000 translated into roughly seven months of ineligibility for Medicaid long-term care coverage.

During those seven months, Mary still needed nursing home care, but Medicaid would not pay. The facility required full payment, so the family paid out of pocket. They quickly spent down most of Mary’s remaining savings and tapped into their own resources—causing significant financial strain and emotional stress at an already difficult time.

The Johnsons’ experience shows how even well-intentioned, ordinary family decisions—like helping pay for a grandchild’s education—can create serious, unexpected consequences under Medicaid’s five-year look-back rule. With earlier planning and professional guidance, those same gifts might have been timed or structured differently, avoiding or reducing the penalty and preserving more of Mary’s assets for her future care.

Proactive Strategies: Addressing the Look Back Rule

While the Five-Year Look Back period presents significant challenges, they are not insurmountable. Proactive planning is essential. Consulting early with an experienced elder law or Medicaid planning attorney ensures families have the information and tools required to make informed decisions about asset transfers, gifts, property, and estate planning. Professionals can recommend and help implement strategies such as:

• Establishing irrevocable trusts to protect assets while ensuring compliance with Medicaid rules.

• Purchasing Medicaid-compliant annuities that convert assets into a stream of income.

• Spending down assets responsibly through allowable expenses—such as home modifications for medical needs, prepaying funeral and burial arrangements, or purchasing necessary medical equipment.

• Documenting the purpose of any transfers to substantiate that they were not made to qualify for Medicaid, which could support a hardship waiver request.

  
  

Even when asset transfers have already occurred within the look-back period, all hope is not lost. With prompt intervention, families may be able to reduce or eliminate penalty periods by providing appropriate documentation, seeking hardship waivers, or negotiating with Medicaid agencies. Each case is unique, and solutions must be tailored to individual circumstances and state regulations.

A Final Word

The Medicaid Five-Year Look Back period is a pivotal aspect of long-term care planning that cannot be overlooked. As seen in the Johnson family’s story, even well-intentioned, generous actions can inadvertently lead to costly penalties and emotional stress. With early, informed planning and the support of an experienced team like Connelly Law, families can meet these challenges, preserve assets, and ensure their loved ones receive the care and dignity they deserve.

If you are considering Medicaid planning or facing a long-term care crisis, consult with professionals who understand the nuances of the law and will advocate for your family at every step. Connelly Law is ready to provide the expertise, reassurance, and solutions you need to navigate this complex landscape with confidence.

The information presented within this blog is intended exclusively for general informational purposes and should not be construed as legal, financial, or healthcare advice. The content, materials, and insights provided may not reflect the most recent developments in these fields and, therefore, should not be relied upon for personal or professional decisions. Further, this blog may contain links to third-party websites, which are included solely for the convenience of our readers. It is essential to note that Connelly Law Offices, Ltd. does not automatically endorse or recommend the contents of these external sites. Given the complexities and nuances of legal, financial, or healthcare matters, we strongly encourage individuals to consult a qualified attorney, a professional fiduciary advisor, or a healthcare provider regarding any specific issues or concerns. Your well-being and informed decision-making are of paramount importance to us.