What Is the “Look-Back” Period in Texas for Medicaid, and How Does It Affect Asset Transfers?


Should You Consider Medicaid Planning?

A Waco Medicaid planning attorney works with older people and their families to preserve and protect the older person’s income, assets, and properties, and to make sure that the older person remains qualified for Medicaid benefits.

Without proper Medicaid planning, healthcare costs can rapidly take an older person’s income and assets. Proper Medicaid planning – with advice from a Waco Medicaid planning lawyer – can help you cover the costs of the long-term medical care that you may eventually require.

However, it may be difficult for some to meet Medicaid’s requirements. Your household income and assets cannot exceed certain thresholds, and you moving assets out of your name within the five-year “look-back” period can cause a penalty period delaying your qualification for benefits. 

What is a Look-Back Period?

To qualify for Medicaid, your assets and income may not exceed the established limit. Medicaid’s five-year look-back period is intended to prevent Medicaid applicants from transferring or giving away their assets in order to meet Medicaid’s asset limit.

The state will look back for five years to determine if you have transferred assets (including transfers made by your spouse). Thus, you need to begin planning for Medicaid long before you may require long-term care.

The five-year look-back period begins on the date you apply for long-term care under Medicaid. A Texas resident who applies for long-term benefits on January 1, 2024, has a look-back period extending back to December 31, 2018. All transactions between these dates may be reviewed.

What Transfers Are Violations of the Look-Back Rule?

Transactions within the five-year Medicaid look-back period could trigger penalties. Such transactions include:

  1.  cash gifted to a family member
  2. a house transferred to a family member
  3. cash or items donated to charities
  4. collectibles or properties sold for less than their market value

Even after someone is on Medicaid, if a Medicaid recipient comes into money (for example, an inheritance) and gives some or all of it away, that gifting may violate the look-back rule.

How Are Violations of the Look-Back Rule Penalized?

Let’s say you are a Texas resident who applied for long-term Medicaid care on January 1, 2024. Within the five-year look-back period, you sold a home to your son or daughter for $20,000, well below its market value of $120,000, and you gave a grandchild $15,000 for college.

This means that you have transfers amounting to $115,000. As of 2024, the “penalty divisor” in Texas is $242.13 per day, so for every $242.13 gifted (or sold below market value), you are penalized with a day of ineligibility. This comes to about one month of disqualification for every $7,339 given away.

Thus, in total, you would be penalized more than 15 months for gifts of $115,000 ($115,000 ÷ $242.13 = 474 days).

Are There Any Exceptions to the Look-Back Rule?

Several exceptions to Medicaid’s five-year look-back rule allow you to transfer particular assets without a penalty. Assets may be transferred to a spouse who is not applying for Medicaid. The following may also be transferred without penalty:

  1.  assets given away or transferred to benefit your child if that child is legally blind or permanently disabled (including a trust you may establish for the child)
  2.  your home, if it is given to your child who is under 21 years old
  3.  your home, if it is transferred to a sibling who is part owner of the home and who has resided there for at least one year prior to your admission to a nursing home
  4.  your home, if it is transferred to your adult child who has acted as your caregiver for two or more years before your admission to a nursing home

What Can You Do if You’ve Breach the Look-Back Rule?

If you have made gifts within Medicaid’s five-year look-back period, you may still be able to qualify for long-term Medicaid benefits. If you can recover your gifted assets, the penalty period will be reduced.

If you are unable to recover your gifted assets, you may apply for an Undue Hardship Waiver. To receive an Undue Hardship Waiver, you’ll have to prove that your efforts to recover your assets failed and that if you don’t receive benefits, you will face considerable financial hardship.

Can You Transfer Any Assets Without Violating the Five-Year Rule?

There are several ways that you can reduce your assets without violating the five-year look-back rule.

Medicaid Compliant Annuities also spend down assets without violating Medicaid’s look-back rule. These annuities convert a lump sum of cash into a monthly income stream for the applicant, lowering his or her assets for Medicaid eligibility.

Assets may also be reduced without breaching the look-back rule by paying off debts, spending for modifications (such as widened doorways and wheelchair ramps) to make your home more accessible, and establishing an irrevocable trust that pays funeral and burial expenses in advance.

Let Rainey & Rainey Help You Qualify for Long-Term Medicaid Benefits

In Texas, your Medicaid planning should be handled by a Waco Medicaid planning attorney who is familiar with Medicaid’s complicated eligibility requirements. The attorneys at Rainey & Rainey advise and advocate on behalf of the elderly and their families throughout the state.

The entire Rainey & Rainey legal team works tirelessly to help the elderly in this state receive the long-term Medicaid benefits they need.

To learn more about Medicaid planning or to begin the planning process, to apply for long-term Medicaid benefits, or if your application for Medicaid benefits has been denied, schedule a meeting with a Waco Medicaid planning lawyer by calling the offices of Rainey & Rainey – today – in Georgetown at 512-598-9005 or in Waco at 254-752-8644.-0987.

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