What is a Medicaid Look-Back Period, and why should you be concerned about planning ahead for Medicaid benefits? We encounter the following factual scenario on a regular basis, which will shed some light on why you may want to start planning now.

Mom can no longer live independently. Mom sells her house and moves in with her son and his family. Son uses mom’s money to remodel or add an addition to his home and to help pay household expenses, such as utilities, food, maintenance. Mom never puts anything in writing indicating son can use her money for such expenses. The reasons for son’s use of mom’s money are usually not well documented. Typically, he sporadically makes cash withdrawals from her account or writes checks to himself for reimbursement.

The finances remain commingled and muddled for years. Then, mom can no longer safely live at home. She needs skilled care at a facility, and Medicaid is the only way to pay for it. However, during the Medicaid Look-Back Period (a retroactive observance of financials going back five years from the Medicaid application date), a caseworker discovers money being transferred to the son’s account. Applicants who gift or transfer money or sell assets for less than fair market value will incur a penalty of ineligibility for a period of time determined by a caseworker.

Because there is no proof mom intended for the son to spend her money and records are sparse with few receipts, the only thing the Medicaid caseworker can see is money going from mom’s bank account to the son’s account over and over in inconsistent amounts for years.

I recently had a couple with a 365-day Medicaid penalty due to how their son used their funds while they lived with him. This means Medicaid will not pay for one year of care.

Families have spent upwards of $100,000 caring for a loved one at home. Sometimes they pay for medications and meals with their own money. Sometimes they use the money of the person they’re caring for. Living together causes their finances to get fuzzy. Most think: As long as we are all provided for, it does not matter whose money we are using. Few think: I should talk to a lawyer before mom moves in to make sure we are all legally and financially protected.

Everyone should meet with a lawyer before moving an aging loved one into their home. Do not let your desire to care for a loved one put you at financial risk. Planning can be done to protect everyone by ensuring the senior is cared for physically and financially, can contribute to the household expenses, and minimize the risk of Medicaid penalty while the family does not fall into financial trouble caring for the senior.