What is the Medi-Cal Look Back Period for California?

by Karl on November 29, 2011[printfriendly]

 
 
 
What is the Medi-Cal Look Back Period for California?
 
 
by
Karl Kim, CFP®, CLTC

Especially confusing for regular people and professionals alike is the California “Look Back Period”. It is one of the most misunderstood concepts of Medi-Cal planning.

That’s because our look back period is different from any other state. California’s look back period is 30 months or 2 ½ years.

The look back period for the rest of the country is 60 months or 5 years.

Some of the common questions are:
  • What exactly is the Look Back Period?
  • Isn’t it the penalty period?
  • If I make a gift within the look back period isn’t someone disqualified for Medi-Cal?
  • If I give my home away, don’t I have to wait until the look back period runs out?
  • The most I can give away is $13,000 per year, right?
  • Isn’t there tax to the person making the gift and the person getting the gift?

These are all common questions. It just shows all of the misinformation floating around out there. So let’s get to the bottom of it.

The term “Look Back” simply refers to the period of time before the Medi-Cal application is submitted.

It could be 30 months or it could be 60 months. It all depends on what state you live in.
 
In California, it is 30 months.

When filling out the Medi-Cal application, the State asks if you’ve given anything away to someone other than your spouse, or transferred anything for less than fair market value within 2 ½ years (30 months) prior to the month of the application.

Husbands and wives can give each other as much as they want with no penalty.

But what happens if a gift is made to someone other than a spouse during the look back period?

Well, it all depends.

  • It depends on how much the gift was for.
  • It also depends on when the gift was made.

Just because a gift is made within the look back period, doesn’t automatically mean that someone is disqualified.

Let’s take a look at an example of how this works.

Let’s say that mom is in a nursing home. Her son is submitting an application in the month of September.
 
She gave him $10,000 2 years ago in September.

So is she disqualified? Let’s walk through the calculation to figure out whether she is or not.

First, we divide $10,000 by the 2011 average monthly private pay rate (APPR) of $6,840. This gives us 1.47 months.
 
California rounds down so 1.47 rounds down to 1 month. Therefore she is ineligible only for one month for the gift.
 
Next we have to determine when the gift was made. Looking at a copy of the check, we see that she wrote the check on September 1st, 2 years ago.
 
Because her penalty was one month, she is disqualified only for the month of September, 2 years ago. The gift has no effect on her application today.

My friends, if a gift or transfer is made within the look back period, the person is either eligible or ineligible for Medi-Cal benefits based on the amount of the gift and the date the gift was made.

What about the home?

Your home is considered an Exempt asset if the intent to return home is established.

This is important because Exempt assets can be transferred to anyone at any time with no penalty. For Medi-Cal purposes, the transfer of an exempt asset is not a gift.

So there is no penalty if it is transferred in the look back period.

And why would someone want to transfer ownership of the home after approval? To avoid Recovery.

What about taxes?

Many people are also confused when it comes to taxes. They have heard that the most someone can give away in a year is $13,000. They also think that someone has to pay income tax on the gift.

Well, part of that is true. The most someone can give away in a year is $13,000 without filing a gift tax return.

So let’s say that a father gives his son $20,000 in a year. The father has to file a gift tax return for $7,000.

This is simply notifying the IRS that he gave away $7,000 more than the $13,000 for a year.
 
There is no income tax to either father or son.

As of 2011, a person can give away up to $5 million while they are alive with no income or gift tax to either party.

Why is all of this important?

Because this is the cornerstone of the strategy to getting a single person qualified who has too much in countable assets.
     
(Note: SB483 was signed in September 2008 and has yet to be implemented. This may lengthen the look back to 5 years. For more details, see Karl Kim’s new ebook “The Secrets to Not Going Broke Paying for Nursing Home Costs…Protect Your Home, Cash and Retirement Accounts”. It is available at www.KarlKimCo.com)
 
 
 
 
Karl Kim, CFP, CLTC is the President of Retirement Planning Advisors, Inc. and is a Medi-Cal specialist. His office is located in La Mirada, CA and can be reached at 714-994-0599 or at www.KarlKimCo.com. He has submitted over 1000 applications with a 99.9% success rate over the past twenty years with a 99.9% success rate. This is meant to be an educational article. Do not make any decisions solely on the information contained herein. Consult your tax advisor, financial planner and attorney before taking any action. We are not responsible for any inaccuracies or misinformation. 
 
 
 
 
 

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{ 1 comment… read it below or add one }

Mel Tatsumi April 21, 2012 at 10:27 am

Karl: I met you at the Long Beach Community Center seminar and recently sent you a check for the book that you let me take that day. I noticed from  my account that you got it . Thanks. Just wanted to tell you that your book has some great information and was very helpful in explaining the complexities of the Cal. Medi-Cal program. I have a couple of Q's. Has SB483 taken effect yet? Also, when is your next seminar in the So. Cal. area ? 
Thanks again.
Mel Tatsumi

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