What is the Five-Year LookbackAnd What Should I Do About It?
In the event you or a loved one needs long-term care during their lifetime (odds are someone you love will), then you should know about the 5-year lookback period for Wyoming Medicaid qualification.
A story will illustrate how important it is to plan for this rule. Mary was in her early eighties and living alone at home. Her husband, Bill, passed away several years before and Mary had one son, Paul. A few years ago, Paul fell on hard times. Paul was a good son and so Mary helped him make his mortgage payments. In total, Mary paid $48,000 toward Paul’s mortgage.
One day, Mary went out to get the newspaper, fell in her driveway and broke her hip. The darn hip never quite healed right after her fall, and Mary needed to move into a nursing home.
Mary and Paul could not believe how expensive the nursing home was! At the rate of $9,600 per month, she was going to run out of money in a few months. They decided to learn about what it would take to qualify for Wyoming Medicaid. When Mary applied for Wyoming Medicaid, one of the questions on the application was whether Mary had given away anything for less than fair market value in the past 5 years. Had she? Well, Mary had paid for Paul’s mortgage in the last few years – and she did not receive any value for it. So, yes, Mary made a gift to Paul of $48,000.
What does that mean? Even after Mary qualifies for Wyoming Medicaid (meaning she has less than $2,000 left of available cash assets), Mary’s gift to Paul means that Mary will need to pay out of pocket for her care for the penalty period created by her gift. How will Mary pay for this care if she doesn’t have any money? Can Paul help her? Probably not. What a mess!
Once a person qualifies for Wyoming Medicaid, the amount they pay out-of-pocket for nursing home care is often equal to their social security payments and any other income they have, which is usually much less than $9,600 per month. The Wyoming Medicaid program requires a 5-year lookback on uncompensated transfers. This means, if a person applies for Wyoming Medicaid and the person gave money away in the 60 months leading up to applying for Wyoming Medicaid, the State can require the person to pay out of pocket for a penalty period, calculated based upon the amount transferred.
Some of our clients mistakenly believe that even during the lookback period, they can gift away the annual gift exemption amount, $17,000 in 2023. This gifting allowance is an IRS gift tax rule, not a Wyoming Medicaid allowance. The gift tax rule only exempts you from having to file a gift tax return with the IRS for your gift.
If Mary had come to see us in advance, we could have helped Mary prevent this mess. Not all uncompensated gifts are bad. Before giving a gift to protect assets, obtain the advice of a qualified attorney. If you or a loved one are interested in Medicaid planning, let our attorneys help advise you how to protect your assets from Medicaid while accelerating the time it takes to qualify for Medicaid. Call Lubnau Law at (307) 682-1313 to make an appointment with one of our experienced attorneys.