This is one of the most common questions I hear from families in Brooklyn who are facing the reality of long-term care planning—and it’s a concern I regularly address as an elder law attorney. You've worked hard your entire life to build something for your children and grandchildren. Maybe you've been giving birthday gifts, helping with college tuition, or simply wanting to see your loved ones enjoy what you've earned while you're still around to see their happiness.
But then you learn about Medicaid's "5-year look-back period," and suddenly everything feels uncertain and frightening.
Let me start with the straightforward answer, and then we'll talk about what this really means for your family: No, a nursing home cannot directly take back money you gifted to someone. However—and this is a big however—if you made gifts within the five years before applying for Medicaid to help pay for nursing home care, those gifts can create a penalty period during which Medicaid won't cover your care costs.
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Understanding Medicaid's 5-Year Look-Back Period
When you apply for Medicaid to help cover nursing home expenses, the state reviews your financial history for the previous 60 months (that's five full years). They're looking for any assets you transferred for less than fair market value—which includes gifts to family members, property transfers, or even selling something to a relative at a discount.
Why does Medicaid do this? The program is designed to help people who have limited financial resources pay for long-term care. The look-back period prevents people from simply giving away all their assets right before applying for benefits. While this makes sense from a policy perspective, it can create real hardship for families who made innocent, well-intentioned gifts without understanding the consequences.
In my nearly 30 years practicing elder law in Brooklyn, I've seen countless families surprised by this rule. They didn't realize that the $20,000 they gave their daughter for a down payment on a house, or the $10,000 they contributed to a grandchild's wedding, could come back to haunt them when a medical crisis strikes.
How the Penalty Period Actually Works
Here's what happens if Medicaid discovers gifts during the look-back period: They calculate a penalty period—a stretch of time when you're ineligible for Medicaid coverage, even though you need it and would otherwise qualify.
The penalty is calculated by dividing the total value of gifts you made by the average monthly cost of nursing home care in New York. For example, if you gifted $150,000 to your children and the average monthly nursing home cost in your region is $15,000, you'd face a 10-month penalty period ($150,000 ÷ $15,000 = 10 months).
During this penalty period, you're responsible for paying for your own care. This creates an impossible situation for many middle-income families: you don't have enough assets left to pay for care (because you gave them away), but you also can't qualify for Medicaid to help cover the costs.
The Good News: Not All Transfers Trigger Penalties
There are important exceptions to the penalty rules that many people don't know about. Certain transfers are considered "exempt," meaning they won't create a penalty period:
Transfers between spouses are generally allowed without penalty. You can freely transfer assets to your spouse for their benefit.
Transfers to a disabled or blind child are exempt from penalties, recognizing that these family members have special needs.
Transfers of your home to specific people may be exempt, including a child under age 21, a child who lived with you for at least two years while providing care that kept you out of a nursing home, or a sibling who has an equity interest in the home and lived there for at least one year before you entered the nursing home.
These exemptions reflect an understanding that not all asset transfers are attempts to game the system—some are simply families taking care of each other.
Can You "Cure" a Penalty?
If you or a loved one already made gifts during the look-back period, there's still hope. Medicaid allows you to "cure" the penalty by having the gift recipient return the assets to you. Once returned, those funds can be used to pay for your care during what would have been the penalty period.
I've helped many Brooklyn families navigate this process. Yes, it's uncomfortable to ask your children to return a gift you gave them. But most adult children would rather return the money than see their parent unable to afford proper care. It's a conversation worth having, and having it early—with legal guidance—makes all the difference.
Planning Ahead Is Everything
The most important takeaway from understanding the 5-year look-back is this: planning ahead matters immensely. If you're thinking about making gifts to family members and there's any chance you might need nursing home care in the next five years, you need to understand the implications first.
This doesn't mean you can never make gifts or help your family. It means you need a strategic plan that protects both your ability to get care when you need it and your desire to pass assets to your loved ones. Strategies like irrevocable trusts, properly structured caregiver agreements, and other planning tools can help you achieve both goals—but only if they're put in place well before a crisis.
For middle-income families in Brooklyn, Queens, and Staten Island, the stakes are especially high. You've worked too hard to lose everything to nursing home costs, but you also can't afford to make mistakes that leave you without access to the care you need.
What Should You Do Now?
If you've made gifts within the past five years and are worried about how this might affect Medicaid eligibility, don't wait to get help. The sooner you address potential penalty issues, the more options you'll have.
If you're thinking about making gifts but haven't yet, pause and talk to an elder law attorney first. What seems like a simple family gift can have complex legal implications that are much easier to navigate with proper guidance.
At Alatsas Law Firm, we've been helping Brooklyn families protect their assets and plan for long-term care since 1996. We understand the unique challenges facing middle-income families in our community, and we know how to develop strategies that honor both your family values and your need for future security.
The 5-year look-back rule doesn't have to be a trap. With the right planning and guidance, you can support your family, protect your assets, and ensure you'll have access to quality care when you need it. That peace of mind is worth far more than worrying alone about what might happen.
Have you made gifts that are within the 5-year window, or are you thinking about your options for the future? The conversation you have today could make all the difference for your family tomorrow.
