If you believe you might need the care of a nursing home when you are older, you could plan on receiving Medicaid to cover your care costs. However, your plans may run into problems if you run afoul of the state look-back period.
Pennsylvania has a 60-month period prior to applying for Medicaid in which you cannot transfer property below its market price value. To avoid a penalty period, consider the following estate planning steps.
Keep records of your transactions
Smart Asset explains that maintaining documents on your financial transactions may help you if Medicaid wants to examine the nature of your past purchases. Your documents should show that you sold property at a market value, helping to prove that you have not been getting rid of assets just to qualify for Medicaid asset limits.
Cease giving assets as gifts
If you regularly give large amounts of money as gifts, you may have to cease your giving if you suspect you are approaching the look-back period. Even gifts that do not incur estate and gift taxes do not avoid Medicaid penalties.
Putting money in an irrevocable trust could also invite a penalty period. When you put money into an irrevocable trust, you no longer own the money in the trust. Medicaid rules will likely look at this transfer as a gift to the trust.
Be aware of qualifying asset transfers
It is possible to transfer money for certain purposes, such as placing money in an irrevocable funeral trust to pay for your burial and funeral. Other possible options include buying a Medicaid-compliant annuity and paying money to a caregiver under a caregiver agreement.
A review of your options can help you qualify for Medicaid when you need it the most in your older years.