There are many aspects of Medicaid that can be very complicated, such as the Medicaid penalty period in Washington. In order to avoid this Medicaid penalty, Washington residents need to understand what the Medicaid look-back period is and how to follow Medicaid’s gifting rules. For most individuals, hiring an elder law attorney in Spokane is the best option for avoiding common Medicaid mistakes.
What Triggers a Medicaid Penalty Period?
Before we dive into the Medicaid penalty period in Washington, you first need to understand Medicaid’s look-back rule. When you are applying for Medicaid long-term care, Medicaid will look-back over a general period of 60 months to see whether or not you have gifted assets or sold assets below the fair market value. This is commonly done for community based services and nursing home Medicaid.
However, the look-back rule does not apply to the regular Medicaid program.
When you are applying for Medicaid, you have to meet the Medicaid eligibility criteria regarding the asset limit. If you are over the asset limit, you have to spend down your excess assets to become eligible. However, you have to do this without violating the look-back rule by either gifting assets or selling them under the fair market value.
If you have done one of these things in the past 60 months or as a way of meeting the eligibility criteria, you will run into what is called the Medicaid penalty period. This is a period of time when you will become ineligible for long-term care through Medicaid. If it is determined that you have violated the look-back rule, your ineligibility period will start the date of your Medicaid application.
How long the penalty period is will be dependent on the fair market value of the assets that were gifted or sold and the average cost of privately paid nursing home care. For example, the more assets that were gifted or sold, the longer the penalty period will be. But once the penalty period is over, you will be eligible to reapply for Medicaid long-term care.
Planning Strategies to Avoid Penalties
Now that you know what the Medicaid penalty period is in Washington, how can you go about avoiding this? The good news is that there are certain steps you can take to plan ahead so that when you apply for Medicaid you haven’t gone against any of the look-back rules.
Here are some examples of strategies you can use to protect your assets from Medicaid while still meeting the eligibility criteria.
Long-Term Planning
If at all possible, the best way to avoid violating any Medicaid look-back rules is to have a long-term plan. Medicaid can only look-back 60 months, so you can use certain strategies before this period if you plan on applying for Medicaid in the future.
For example, you can gift assets to loved ones 60 months before applying for Medicaid or sell certain assets off.
Medicaid Asset Protection Trust
You have the option of shielding assets from Medicaid with an irrevocable Medicaid asset protection trust. Once put into the trust, these assets will no longer be considered as a part of your estate and will be distributed to your beneficiaries once you have passed away.
Keep in mind that you must set up this trust at least five years before you apply for Medicaid to avoid running into issues.
Personal Care Agreements
To avoid violating Medicaid’s look-back rule, you need to have your personal care agreement in writing, instead of relying on a verbal agreement. This agreement will detail who will provide essential care and will provide extensive details regarding your caregiver’s duties. It should also provide compensation information that aligns with the local market rate for that level of care
Once a personal care agreement has been written and signed, any payments made for this care will be legitimate and won’t break any Medicaid rules.
Pay Off Debt
One very useful solution for using your assets without breaking Medicaid’s look-back rule is by paying off debt. This is an acceptable way to spend down additional assets you have as a way of becoming eligible for Medicaid without violating any rules. You can pay off debt such as mortgages, loans, credit cards, etc.
An added benefit of doing this is that you will lighten the financial burden on your loved ones.
What to Do if You’re Already in a Penalty Period
If you have already violated Medicaid’s look-back rule and have entered the penalty period, there are a few solutions. Before you do anything, the very first step you should take is to hire a long-term care attorney in Washington. An attorney can help you navigate this situation to get the best possible outcome.
From there, you may be able to have the penalization period reconsidered if you can recuperate any assets that you gifted, which broke the look-back rule. If this isn’t a possibility, you could apply for an undue hardship waiver, depending on your situation.
Get in Touch With an Elder Law Attorney Today
If you want to avoid Medicaid planning mistakes and begin asset protection for Medicaid, reach out to an elder law planning attorney at Legacy Law Group in Spokane, WA. Contact us today at 509-315-8087 to speak with one of our attorneys to get the process started.
FAQ
What is the Medicaid look-back period in Washington?
The Medicaid look-back rule is triggered when you submit your application for Medicaid. Medicaid will look-back over the past five years to examine your financial transactions to ensure you haven’t gifted or sold assets below the fair market value.
Can I gift money to my children without a penalty?
Yes, it is possible to give gifts to your children without running into the Medicaid penalty period in Washington. However, to do this, you need to plan in advance and gift assets at least five years before you apply for Medicaid.
What if I already made a transfer that caused a penalty?
If you are already in the penalty period, an elder law attorney can help you move forward with solutions like, strategic planning or recuperating assets.
