If you are applying for Medicaid or VA Pension in Alabama, and are familiar with elder law, you may have heard of the “look back” period. This is the time when the government sees if you have given away gifts or assets in order to qualify for benefits. It is important for you to be aware of “look back” rules, especially because there are different rules between Medicaid and VA Pension.

Why Is There A “Look Back”?

Whether your application is for VA Aid and Attendance or Alabama Medicaid, you will have to satisfy certain income and asset requirements. If you don’t meet these net worth requirements, you may legally spend down, transfer, or give away some of your assets. The look back period is when the state government checks the validity of your transfers; if some of these transfers are improper, you may face a penalty or be ineligible for aid.

Alabama Medicaid Look Back

If you are applying for Alabama Medicaid, there will be a five-year look back period, which means that the state will check back at the five years (60 months) prior to your application.

Generally, transfers done for less than the fair market value may lead to a penalty: instead of having your nursing home care paid for, your family may have to pay for it out of pocket. There are exceptions to this penalty rule, but they are not very common.

VA Pension Look Back

VA Pension (Aid and Attendance) has no look back period. Instead, the VA implements its own rules on who qualifies. Note, however, that in making gifts or transferring assets to qualify for VA Pension, there are strategies that would give you advantages and disadvantages. So even if there is no look back for your veteran pension, you will still need to make choices carefully.

Other Look Back Considerations

The first important thing is to determine which benefit makes the most sense for your situation, and once you have decided to apply for it, you need to decide how to transfer your assets.

It is common for families to make gifts for their children or to put their assets in an irrevocable trust. Many families, especially those applying for VA benefits – also purchase one or more annuities, sometimes taking a lump sum of assets and turning it into income. But annuities can be complicated, and some families have even fallen into financial hardships because of annuity salespeople who put them into the wrong product.

Remember that benefits and transfers are case-to-case matters – what works for some may not be what works for you. Further, if one strategy seems to work for you, there may be another strategy that could serve you better and maximize your financial situation.

For either Medicaid or VA Pension, it is best for you to be informed of the specific rules and legal implications. You may talk to a financial advisor, or better yet, consult a lawyer who can focus on your specific situation.