Medicaid helps many older adults cover long-term care. Before someone can qualify, Medicaid checks their financial history. This review includes something called the five-year look-back period that families need to understand to avoid delays or penalties.
How the five-year look-back period works
When someone applies for long-term care Medicaid in Delaware, the state will review all financial records from the past five years. These include bank statements, property records, retirement account activity, and any other asset transfers. The goal is to find out if the person gave away or moved money or property to qualify for Medicaid sooner.
If the state finds gifts or transfers for less than fair market value during this five-year period, it may create a penalty. As a result, the person will have to wait before Medicaid starts paying for care.
The length of the penalty depends on the value of what was given away. For example, if someone gave away $60,000 and the average cost of care in Delaware is $10,000 per month, the penalty would be six months without Medicaid coverage.
Types of transfers that can cause problems
Giving large cash gifts to family or friends can trigger a penalty, as can selling property for much less than its actual value. If someone gives away a home, transfers money to a trust, or moves assets to someone else’s name, Medicaid will count these actions during the five-year look-back.
Even helping a child with a down payment or paying a grandchild’s college tuition might count as a transfer. These may seem like normal family support, but Medicaid sees them as gifts. That’s why families need to plan carefully before moving money or assets.
Some transfers don’t cause a penalty. For example, transferring a home to a spouse or a disabled child usually won’t count against the person applying for Medicaid. The rules allow some exceptions, but families must follow them closely.
Understanding the five-year look-back period can help Delaware families avoid problems when applying for Medicaid. Knowing the rules gives families more control and fewer surprises during a stressful time.