What is the five year look-back? | 3rd Level Wealth
What is the five year look-back?
Imagine working your entire life while accumulating some assets only to have it taken away at the end.
Anyone who has experienced a loved one’s end of life care and the difficult decisions that come with may be able to relate. It doesn’t seem fair that a person can work so hard for so long yet end up spending a majority (or all) of their wealth in their final years on healthcare. Home health care, assisted living and long term care can get expensive in a hurry and wipe out decades of saving.
What to do?
There are some planning options available. One is the five year look-back in accordance with medicaid. The rules will vary by state but essentially the government will “look-back” at all assets transferred or sold within the past five years of your medicaid application if you need it for long term care. They want to make sure the assets were sold for fair market value and not transferred out of your name just to avoid paying costs for care. It takes some planning and foresight, but could end up saving families a lot of money in the long run under certain circumstances.
This is a really great discussion for people who are retired and could comfortably live on a portion of their accumulated assets. It would also be a great idea to review long term care needs as part of your financial planning process to see if it is a viable and cost effective option.
The last thing you want to do is work your entire life only to give it all back in the end when it could have been prevented with a little planning.
3rd Level Wealth
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