Asset Transfer Lookback Period
The 5-year (60-month) window before a Medicaid long-term care application during which asset transfers below fair market value can trigger a penalty period of ineligibility.
The Medicaid asset transfer lookback period is a 60-month window immediately preceding a long-term care Medicaid application during which the state reviews all asset transfers by the applicant (and spouse, in some cases). Any transfer of assets for less than fair market value during this window — gifts to children, transfers to trusts, below-market sales — creates a "transfer penalty": a period of Medicaid ineligibility calculated by dividing the transferred amount by the state's average monthly private-pay nursing home cost.
Example: if your state's average is $8,000/month and you transferred $80,000 to your children 3 years before applying, the penalty period is 10 months ($80,000 ÷ $8,000 = 10) during which Medicaid will not pay for nursing home care. Critically, the penalty period begins running only when the applicant would otherwise be eligible for Medicaid — meaning it does not start until assets are spent down to the limit, creating a period with no Medicaid coverage and potentially exhausted personal assets.
The 5-year lookback does not apply to all transfers: gifts between spouses are exempt, transfers to certain disabled children are exempt, and some irrevocable trust transfers follow different rules. The lookback was established by the Deficit Reduction Act of 2005, replacing a prior 3-year lookback period.
Real-World Example
A parent transferred $120,000 in securities to her children 2.5 years before entering a nursing home and applying for Medicaid; the state imposed a 15-month penalty period (in a state with an $8,000/month private-pay average), during which she depleted her remaining $35,000 in savings paying privately — creating a 2-month gap with no funds before Medicaid took effect.