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Lou, Tax Preparer
Category: Tax
Satisfied Customers: 404
Experience:  25+ yrs Experience Personal Income Taxes - Former DM for H&R Block in California
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Hello, Client has general power of attorney over elderly

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Client has general power of attorney over elderly aunt''s assests. Aunt''s health recently detoriated such that she likely will not live much longer. Client is attempting to drain aunt''s bank account by making gifts to family members and such of $12k so the assests do not remain in the Estate (which is under the exemption amount) thus avoiding probate. Client also wishes to avoid the state taking over the bank accounts to pay medical expenses. Doesn''t the state have a 5 year look-back over gifts prior to death? Greatly appreciate anyone with any knowledge on this subject to point me in the right direction.

Donya S. Oneto, CPA
Cell:      XXX-XXX-XXXX
Fax:     XXX-XXX-XXXX [email protected]

Hello and thank you for contacting Just Answer. We appreciate the opportunity to be of service to you.

I want to make it clear to you that I am not an attorney and this information is not intended to be construed as legal advice. You should contact an Elder Care Attorney in your area for legal advice and/or specific interpretations based upon your facts.

Generally speaking here are the rules:

In an attempt to make it more difficult for people who can afford to pay for care but try to qualify for Medicaid, Congress has passed several laws addressing Medicaid Planning. The first of which, passed in 1993, was called the Omnibus Budget Reconciliation Act.

This law created long "look-back" periods into the financial history of the Medicaid applicant. Specifically, if an individual divested himself of assets within a certain period (regardless of intent), it would affect his or her ability to qualify for benefits. The "look-back" penalty would create a period of ineligibility which must be met before he or she can apply again.

Below are the asset transfer "look back" periods:

  • Cash assets or assets in a Revocable Living Trust: 60 months.
  • Assets in an Irrevocable Living Trust: 60 months
  • Non trust assets 36 months.

In addition to the "look-back" periods, any income the individual receives, including that which the individual simply has access to for an Irrevocable Living Trust, will be included when determining the income qualifying limits. If a person applies for Medicaid and it is determined that assets were transferred within the "look-back" period, then a penalty will be imposed.

The penalty is calculated by taking the average monthly cost of the nursing home stay (for example $5,000) and dividing it into the value of the distributed assets. For example, if a person transferred $350,000, you would divide $5,000 into $350,000 for a total of 70. Therefore, Medicaid would not pay benefits for a total of 70 months.

There are exceptions to the transfer penalty for a disabled child or disabled individual under the age of 65.

Here is a link to a website that will give you more information:

If you have any follow up questions please let me know.


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