One day, a few years back, Nancy came to us to protect her mother, Betty’s, last $25,000. Betty, had been in a nursing home for three years and had used all of her savings except for that little bit. Nancy wanted to hold it back to use for Betty to buy clothes, a special chair and pay travel expenses so her disabled brother could visit Betty. A lady from the nursing home business office told her about our office.
As we began to work together Nancy told me of the monthly expenses for nursing home care and that every year she would ask her mother’s financial advisor if there was any way she could protect any of her mother’s money. The advisor always told her the same thing: “You can’t protect it because it is within the five year lookback period.” She’d ask, “Isn’t there anything we can do?” To which he would answer, “No.”
At the end of our first meeting Nancy asked me, “Could you have protected any of my mother’s money?” “Yes, Nancy, I could have.” I said. Then she asked the next question, “How much could you have protected?” The silence in the air was palpable. That was a question I did not want to answer but I swallowed hard and said, “Probably all of it.” She began to cry. She reviewed all the times she and the financial advisor spoke and all the times he assured her there was nothing that could be done. She was devastated. We continued to work together to protect the last little bit, and each time I spoke with Nancy she would talk about how hard it was to accept that the advisor gave her misinformation. She contemplated a lawsuit but I don’t know if she pursued it.
I hope to never be in the place of answering that question again. Yes, there is a “Five Year Lookback.” What it means is that you cannot gift away assets for the purpose of becoming eligible for Medicaid within the five years prior to seeking benefits. That means you cannot even give away the amount allowed under IRS guidelines, this year $14,500, for not reporting a gift. (That’s a different law for a different purpose). But what many people do not know is that there are legitimate and legal planning opportunities to protect assets without giving them away and triggering the Lookback.
The bottom line is, giving away assets it not the only way to protect. And, in case you want to know when it is too late to protect assets for benefits, here’s the answer: After the money has been spent.