Question and Answer About Medicaid 5-year Lookback Period, Shutterstock Photo ID 1186435291, Image by iQoncept
Question and Answer About Medicaid 5-year Lookback Period

We received a question through about Medicaid eligibility, transfer penalties, and the 5-year lookback period. This article restates the Medicaid 5-year lookback question without identifying the inquiring person and shows the typical response that we give to these questions.


“I inherited a house and land that my family has owned for many years. I want to pass ownership of the property down through future generations of my family. A lawyer advised me to transfer ownership of the property so that my children would own it as tenants in common. How will this affect the 5-year lookback period under Medicaid law if I need nursing home care someday?”

Hawkins Law PC Answer: 

You did not tell us where you live, so we presume that you live in Indiana. If you do not live in Indiana, please let us know the state in which you live and the state where the real estate is located. If you live in Illinois, Jeff Hawkins can answer your question because he is licensed to practice in Illinois. If you do not reside in Indiana or Illinois, we would refer you to duly licensed counsel in the state where you reside.

5-Year Lookback

Federal law requires each state to determine whether a person applying for Medicaid assistance to pay for nursing home care or similar long-term care (let’s call the care “LTC care”) has transferred an asset for less than the fair market value of the asset within the past 5 years (Medicaid law calls this the “5-year lookback”). The 5-year lookback is the first of two Medicaid application steps to determine whether an asset transfer will affect Medicaid eligibility.

Medicaid’s 5-year lookback applies if a person transfers an asset as a pure gift or “sells” it for less than the asset’s fair market value within 5 years before applying for Medicaid to pay for LTC care. The person must report information about the transfer with other information that the state Medicaid agency requires as part of the Medicaid application process (the 1st step).

Transfer Penalty Calculation

The second step to consider the effect of a transfer on a person’s Medicaid eligibility depends upon state law of the state where the person lives. Normally, Medicaid law requires state Medicaid agencies to divide the uncompensated or under compensated value of the transferred asset by a value that relates to the cost of nursing home care for one month in that state. The Indiana Family and Social Services Administration (FSSA) divides the uncompensated value of a transferred asset by the average cost of a one month stay in an Indiana nursing home, which FSSA usually updates as of July 1 and posts on its website. FSSA’s website states that the current average cost of a one month stay in Indiana nursing home is $6,527, as of July 1, 2018.

Transfer Penalty Example

Consider, for example, a $99,999 uncompensated transfer (a $100,000 home sold to family for $1). FSSA calculates the penalty period by dividing the $99,000 transfer value by the $6,527 average monthly nursing cost to determine the number of months of transfer penalty ($99,999/$6,527/mo = 15.32 months, which FSSA converts to 15 months and 10 days).

Avoid Real Estate Partition!

We recommend that a person take an extra step to protect family heritage property instead of simply conveying the real estate to children as tenants in common. Most states have real estate partition laws that allow a real estate co-owner to force public sale of real estate and convert the co-owner’s property ownership into cash. A skillful real estate lawyer could file a partition lawsuit against his client’s co-tenants and complete a partition sale in a public auction in about 90 days after filing the lawsuit. The only thing that the partition lawsuit defendants can do to stop the partition sale is to pay enough money to convince the money-hungry co-tenant to sell the real estate to them.

Many people say that their family members would never sell important family real estate. That may be true in some families, but job layoffs, serious accidents or illnesses, divorces, and drug or alcohol addiction change everything. Creditors can force and indebted  property owner’s property share into a public auction to collect money from the indebted person against the other property owners’ wishes.

We often use LLCs and irrevocable trusts to protect family real estate from potential threats that can lead to partition sales. The choice of strategy depends upon the family’s needs, and we customize each case to fit the circumstances.

Elder Law Attorneys Explain Laws and Strategies

It intrigues us that you received this advice from an elder law attorney. Some lawyers claim to be elder law attorneys, but experienced elder law attorneys normally explain transfer penalty issues when they recommend asset protection strategies that involve asset transfers. We hope the lawyer with whom you consulted offered such an explanation.

About the Authors

Jeff R. Hawkins and Jennifer J. Hawkins have practiced in the areas of trusts, estates, and elder law for over 25 years. Both lawyers are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation;  a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association. Find more information about these and other topics at © Copyright 2018 Hawkins Law PC. All rights reserved.

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