People’s life savings are being spent down because of a mistaken belief or incorrect advice about the Medi-Cal “Look Back Period.”
Sometimes they’ve heard from advisors like attorneys, CPA’s, social workers or even family and friends that the look back period is three years or five years.
This is incorrect.
Unfortunately, it is also commonly believed that if a transfer or gift is made within the look back period, the applicant is automatically disqualified from receiving Medi-Cal benefits.
This also is absolutely not true.
The “Look Back Period” simply means that Medi-Cal looks back a certain number of months prior to application to see if countable assets like cash, stocks, bonds, or mutual funds, for example, were transferred or given away to someone other than the spouse.
California’s Medi-Cal Look Back Period
Here in California the look back period is still 2 ½ years or 30 months.
Let’s take a look at what Medi-Cal considers a gift or transfer for less than fair market value.
One example of a gift is simply writing a check, giving cash or a countable asset to someone other than your spouse and not receiving anything in return.
A gift could also be taking a person’s name off an account.
For example, suppose mom has a joint savings account with her daughter and there is a balance of $25,000. If mom removes her name from the account and leaves it in her daughter’s name only, she has made a gift of $25,000 to her daughter.
Selling an asset for less than fair market value is also a gift.
For example, dad owns a second home worth $500,000. He sells it to son for $100,000. That is a gift of $400,000.
If you have made a gift or transfer during the look back period, you’re either eligible or ineligible for Medi-Cal benefits based on how much you’ve given away and when. Your period of ineligibility may be one month or ten years plus!
Again, depending on how much you gave away or transferred, the ineligibility period may have already passed and you may immediately be eligible for Medi-Cal benefits despite the transfer. Or you may have many more years to wait before you may be eligible for benefits.
Medi-Cal Eligibility Example
Let’s walk through an example to see how this works.
Let’s say that I submitted my application in May, 2010. Assume that my countable assets are currently under $2,000 and that I gave my son $10,000 in cash 2 years ago. The period of ineligibility is one month (the month that the transfer was made in).
However, since I am applying one year and eleven months after the transfer was made, this transfer has no bearing on my eligibility for benefits whatsoever. The period of ineligibility has already run its course.
Now let’s look at another example.
Instead of $10,000, let’s say I gave my son $150,000 14 months ago. I am ineligible for Medi-Cal benefits for 19 months from the date of the gift. But here’s the problem, I am applying in month 14 rather after month 19. Therefore I have to wait another 5 months before I can apply again because I applied too soon.
Here’s a little known secret.
If I had just waited another month before applying until the transfer made was outside of the look back period, it would have had no bearing on my eligibility.
The rules are that you can apply after the shorter of either 30 months or the period of ineligibility. For example, if the period of ineligibility is 48 months, you can apply in the month after the 30th month. If the period of ineligibility is 3 months, you can apply in month 4.
When it comes to gifting, another common myth is that you can only give away up to $14,000 in a calendar year.
This is not true.
If you wanted to give your three kids each $1 million in cash you can. There would be no tax to them for receiving the gift and no tax to you for making the gift.
The issue is whether or not you have to file a Gift Tax Return and pay any gift tax.
The rules are you can give away up to $14,000 per year per person without having to file a gift tax return. If you give away more than that you have to file a gift tax return for the amount in excess of $14,000.
Once you have made cumulative lifetime gifts in excess of $5.43 million, gift taxes must be paid. But as long as you don’t give away more than $5.43 million in your lifetime, there is no gift tax.
Just because someone currently has too much in assets to qualify for Medi-Cal does not mean that they have to spend down. There is a way to get the person qualified, in many cases almost immediately within the Medi-Cal rules.
Medi-Cal Qualification Case Study
Recently we had a family come in for their mother who had been in the hospital and now was going to a long-term care facility. They had heard from their attorney and financial advisor that there was no way that their mother would qualify for Medi-Cal as she had too much money.
After our analysis, it was determined that she had $383,863 too much to qualify for Medi-Cal. Fortunately, her funds were in her bank account and liquid.
Using a little known gifting strategy, we were able to qualify her for Medi-Cal immediately. Everything was above board. All of the gifting paperwork was sent in with the application and disclosed to Medi-Cal.
Moral of the story is that even if you think you can’t qualify for Medi-Cal, there is a good chance that you can. There may be a way to protect your home, cash and retirement accounts for your family.