Are payments to third parties subject to Medicaid’s five-year look-back rule? If I purchase item(s) for my child, but make the check out to a third party (i.e., check paid to retailer for appliances, to firm for landscaping services, to roofing company for new roof, etc.), are these also subject to the five-year rule, even if the check is not payable to my child?
The answer is technically yes. It is a gift and subject to the five-year rule. Practically you might get away with it, but it’s a question of honesty and public policy. When you apply for Medicaid, the application asks if you’ve made any gifts during the prior five years. If you say no, the workers may not pick up a payment on behalf of someone else in your financial records. But do you really want to do this? Everyone complains about their high taxes, and Medicaid is one of the most expensive items for both state and federal governments. It pays for long-term care for people who can’t afford to pay for it themselves. It tries not to pay for people who have taken affirmative actions to make themselves poor. The five-year look-back period is an administrative convenience — few people have reliable records going back further and it costs a lot for the Medicaid agency to review all of these records. Do you really want to circumvent that rule? Doing so means higher taxes for everyone (or more debt if we don’t pay the taxes).
For more information about Medicaid’s asset transfer rules, click here.