Understanding Medicaid’s 5-Year Look-Back Period

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When a person applies for long-term care Medicaid in North Carolina, the Department of Social Services (DSS) conducts a thorough financial review to determine eligibility. A critical part of this review is the 5-year look-back period.

This rule can be confusing and is often a source of stress for families. Let’s break down what it means in simple terms.

What is the 5-Year Look-Back?

The look-back period is the five-year (60-month) window of time immediately preceding the date of a person’s Medicaid application.

For example, if you submit a Medicaid application on August 25, 2025, the look-back period begins on August 25, 2020. DSS has the authority to review all of your financial records from that five-year period.

What Does DSS Look For?

During the look-back period, the DSS caseworker is searching for any “uncompensated transfers”—that is, any assets or money that were given away or sold for less than fair market value.

This includes:

  • Large cash gifts to children or grandchildren.
  • Selling a home or car to a relative for a token amount.
  • Adding a child’s name to a bank account or property title.
  • Large cash withdrawals that cannot be accounted for with receipts.

DSS requires proof for nearly every transaction to ensure that assets were not intentionally given away to meet Medicaid’s strict asset limits (typically $2,000 for an individual).

How is the Penalty Calculated?

If DSS discovers uncompensated transfers during the look-back period, they will impose a penalty. This is a period of time during which the applicant will be ineligible for Medicaid benefits, even if they otherwise qualify.

The length of the penalty is calculated by taking the total value of the transferred assets and dividing it by a figure known as the “average monthly cost of a nursing facility” in North Carolina. For 2025, this penalty divisor is $8,215.

For example, if a person gave away $100,000 during the look-back period, they would face a penalty of over 12 months ($100,000 ÷ $8,215 = 12.17). This means DSS would not pay for their long-term care for more than a year after they have already spent down their assets.

The Importance of Timing and Proper Planning

The timing of a Medicaid application is critical. If a significant gift was made just outside the 5-year look-back window, it will not be penalized. Applying even one day too early could result in a devastating penalty period.

Medicaid’s rules are incredibly complex, and a small misstep can cause a significant financial hardship for your family. An experienced elder law attorney can help you understand the rules, determine the best time to apply, and explore legal strategies to protect your family’s assets.

If you need help with planning for Medicaid eligibility, our seasoned attorneys can help. Call our office at (919) 256-7000 to schedule a consultation.