For gifts and other transfers for less than fair market value made on or after February 8, 2006, the look-back period is 60 months before the date you are both in a nursing home and have applied for Medicaid (42 U.S.C. 1396p(c)(1)(B), checked October 14, 2026).
What the look-back period is
When someone applies for Medicaid to pay for nursing home care, the state reviews every transfer made during the look-back period. For transfers made on or after February 8, 2006, that period is 60 months. It is counted back from the first date the person is both in a nursing home (or a similar level of care) and has applied for Medicaid (42 U.S.C. 1396p, checked October 14, 2026). The Deficit Reduction Act of 2005 set the 60 months; before it, the period was generally 36 months (same source).
The rule applies to nursing facility care and to home and community-based services provided under a Medicaid waiver. A state may also apply it to some other long-term care services (same source).
The look-back is not a ban on giving. It is a waiting period, and someone has to pay for care during it.
What counts as a transfer
The test is whether you gave up an asset "for less than fair market value" (42 U.S.C. 1396p, checked October 14, 2026). Common examples:
- Cash gifts to children or grandchildren.
- Putting a child's name on the deed to your house, or selling the house to a relative for less than it is worth.
- Adding someone to a joint account or jointly owned property and then letting them take money or ownership out. The law treats the asset as transferred when any action, by you or by the other owner, reduces your ownership or control (42 U.S.C. 1396p(c)(3), checked October 14, 2026).
- Lending money on a promissory note that does not meet the federal rules, described below.
- Buying an annuity that does not meet the federal rules, for example one that does not name the state as a remainder beneficiary for the Medicaid it pays (42 U.S.C. 1396p(c)(1)(F) and (G), checked October 14, 2026).
The federal gift tax exclusion is a different rule. In 2026 you can give $19,000 to any person without it counting as a taxable gift (IRS, Rev. Proc. 2025-32, October 2025), but Medicaid has no matching allowance. A gift that is fine for the IRS can still cause a Medicaid penalty.
How the penalty is figured
The penalty is a number of months. The state adds up the uncompensated value of everything transferred during the look-back period and divides it by the average monthly cost to a private patient of nursing facility care in the state, at the time of application (42 U.S.C. 1396p(c)(1)(E), checked October 14, 2026). States set that divisor and update it, so ask your state Medicaid office for the current figure. A state may instead use the cost in the community where the person lives in a facility (same source).
Three details surprise families:
- The clock starts late. For transfers since February 8, 2006, the penalty begins on the later of the month of the transfer, or the date the person is otherwise eligible and receiving nursing home level care, based on an approved application (42 U.S.C. 1396p(c)(1)(D)(ii), checked October 14, 2026). In practice that is often after savings are already spent.
- No rounding down. States may not ignore a partial month of penalty (42 U.S.C. 1396p(c)(1)(E)(iv)).
- Small gifts add up. A state may treat many small transfers as one (42 U.S.C. 1396p(c)(1)(H)).
Transfers the law exempts
Federal law lists transfers that do not cause a penalty (42 U.S.C. 1396p(c)(2), checked October 14, 2026):
- Transfers of anything to your spouse, or to another person for the sole benefit of your spouse.
- Transfers of the home to: your spouse; a child under 21; a child who is blind or disabled; a brother or sister who has an ownership share in the home and lived there at least one year right before you entered the nursing home; or a son or daughter who lived in the home at least two years right before you entered the nursing home and gave care that kept you out of a facility.
- Transfers to a blind or disabled child, or to a trust solely for that child, and transfers to certain trusts solely for a disabled person under 65.
- Transfers you can show were meant to be for fair value, were made only for a reason other than qualifying for Medicaid, or were all returned to you.
- Cases where the state finds that denying coverage would cause undue hardship, under criteria the federal government sets. The nursing home may file a hardship request on your behalf with your consent (same source).
Each exemption has proof requirements that states apply in their own way.
Promissory notes and installment notes
Families sometimes sell a house or lend money to a relative in exchange for a note. Under federal law, money used to buy a promissory note, loan or mortgage counts as a transfer unless the note meets all three tests: its repayment term is actuarially sound under Social Security Office of the Chief Actuary tables; it pays in equal amounts with no deferral and no balloon payment; and it does not allow the balance to be canceled when the lender dies. A note that fails is valued at its outstanding balance on the date of the Medicaid application (42 U.S.C. 1396p(c)(1)(I), checked October 14, 2026).
A note that passes these tests is not a gift, but its payments and value may still be counted under your state's income and resource rules. An elder law attorney can review the terms before anything is signed. For the tax side of selling a home on payments, see Form 6252 and installment sales.
When planning ahead can make sense
The look-back rewards early, documented decisions. A gift made more than 60 months before an application is outside the window. Paying fair value for things you need, such as home repairs, a care manager or a written care agreement with a family member at a reasonable rate, is not a gift if it is documented.
None of this is a do-it-yourself project once care is near. Your local Area Agency on Aging can point you to free counseling and legal aid through the Eldercare Locator (1-800-677-1116), and an elder law attorney licensed in your state can tell you how your state applies each rule. If a loved one is being pressured to hand over money or property, see elder financial abuse.
A plain example: a $100,000 gift three years before applying
Hypothetical: a widow gives her two children $50,000 each, 36 months before she enters a nursing home and applies for Medicaid. The penalty is the gift divided by the state's monthly divisor. The divisors below are hypothetical; your state sets its own.
| Hypothetical state divisor (per month) | Penalty months | Care she must pay for privately at that divisor |
|---|---|---|
| $8,000 | 12.5 | $100,000 |
| $10,000 | 10.0 | $100,000 |
| $12,000 | 8.33 | $100,000 |
Arithmetic: $100,000 / $8,000 = 12.5 months; $100,000 / $10,000 = 10 months; $100,000 / $12,000 = 8.33 months. Partial months count. The penalty starts only when she has spent down and would otherwise qualify, so the family must cover those months from somewhere. If her actual nursing home costs more than the divisor, the gap is larger. For comparison, the national median for a semi-private nursing home room was $9,581 a month (CareScout Cost of Care Survey 2025, data tables dated March 2, 2026). See how much long-term care costs in your state.
Made 61 months before the application, the same gift would cause no penalty.
Red flags
- Being told "you can give $19,000 a year to each child and Medicaid will not care." That is a gift tax rule, not a Medicaid rule.
- Advice to put a child on the deed "to protect the house" without a review of the look-back and tax consequences.
- Being told the penalty starts the day you make the gift. For transfers since 2006 it usually starts much later.
- A plan that depends on not reporting gifts or bank transfers on the Medicaid application.
- Pressure to buy an annuity or sign a promissory note quickly without seeing how it meets the federal rules in writing.
- A family member asking to be added to your accounts "to help with bills" and then moving money out.
- Someone selling a "Medicaid plan" who will not explain your state's rules or put the advice in writing.
- A promise that a trust set up last year makes your assets invisible to Medicaid.
- Being told every state uses the same penalty divisor.
- Advice that ignores the capital gains tax a child may owe after receiving the house as a gift.
Questions to ask before you sign
- What is my state's current monthly penalty divisor, and when was it last updated?
- Which of my past gifts, loans or account changes fall inside the 60-month window?
- Does my state treat many small gifts as one transfer?
- Would a transfer of the home to my spouse, a disabled child or a caregiver child qualify as exempt, and what proof is needed?
- If I pay a family member for care, what written agreement and pay rate does my state accept?
- Does this promissory note or annuity meet each federal test, and how will my state count its payments?
- If I make a gift now, when would a penalty start and who would pay for care during it?
- Can a gift be returned to cancel the penalty in my state, and how?
- How does my state handle undue hardship requests?
- What are the income tax consequences for my children if they receive the house now instead of at my death?
Long-Term Care and Your Home: Read This Before You Sign
A one-page checklist: what Medicare will and will not pay, the Medicaid look-back and estate recovery basics, the questions to ask before you buy long-term care coverage or take a reverse mortgage, and the tax rules if the house is sold. Look-back basics on one page: what counts as a gift, how penalties start, and what to ask before moving money. We’ll email it to you.
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Sources
- Cornell Law School LII: 42 U.S. Code 1396p, Liens, adjustments and recoveries, and transfers of assets (checked October 14, 2026)
- IRS: Revenue Procedure 2025-32, 2026 inflation adjustments, gift tax annual exclusion (October 2025)
- CareScout: Cost of Care Survey 2025 (data tables dated March 2, 2026)
- Administration for Community Living: Eldercare Locator (checked October 14, 2026)
The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.