Medicaid 5-Year Look-Back Period: Rules, Exceptions & Penalties

One of the most impactful rules of long-term care planning is the Medicaid 5-Year Look-Back. The state looks back 60 months (5 years) from the date of your long term care Medicaid application, and reviews all transfers, gifts, and below-market-value sales. If any transfer occurs during this "look-back" period that is not for compensation, then you will be penalized with a period of Medicaid ineligibility, which means you will have to cover the costs of long-term care yourself when you are otherwise eligible. The penalty period equals the total value of uncompensated transfers divided by the state's "penalty divisor" (usually the state's average monthly private-pay nursing home charge). There is no limit to the amount of penalty periods, and large transfers can result in penalty periods of over 10 years. While the 60-month look-back applies to the long-term care Medicaid (nursing home and HCBS waiver) program, it is not applicable to regular Medicaid for Aged, Blind and Disabled beneficiaries. What's unique about California is that they have a 30 month look-back instead of a 60 month look-back. California temporarily paused the look-back during 2024-2025, but will implement the look-back starting January 1, 2026, gradually building up to 30 months by July 2028. New York has no look-back for Community Medicaid (similar to HCBS Waivers in other states). The gift tax exclusion of $19,000 per recipient in 2026 doesn't affect Medicaid look-back periods – all dollars given in the 60 months prior to a transfer into the Medicaid program are part of the count.

This guide provides an overview of the Medicaid 5-year look-back, calculation of penalty periods, exceptions, and state differences for 2026. Medicaid.gov, CMS and elder law sources provide information.

How the look-back works

The 5-year look back is from the date of your Medicaid application. A long-term care Medicaid applicant who applies on June 15, 2026, will have financial transactions from June 15, 2021 to June 15, 2026, being included in the look-back period.

In this 60 month review period the state Medicaid agency looks back at all asset transfers, gifts and sales less than fair market value. The state asks for proof of substantial financial transactions, such as bank statements, real estate purchases and sales, vehicle transactions, asset transfers and more.

Transfers that do not comply with the look-back rule are:

• Gifts, either cash or other, to children, grandchildren, etc. of family members

• If the property is transferred for less than the fair market value (selling a home to children for $1, for example)

• Major gifts to Charity

• Loans to friends or family for no documentation as loans

• Unarranged payment to carers

• Transfers to irrevocable trusts (with some exceptions)

Medicare is not included in the $19,000 gift tax exclusion per person that the IRS offers in 2026. The IRS will not require reporting a gift of less than this amount, but that doesn't mean that Medicaid will overlook it. Each dollar donated during the "look-back" period is counted.

Medicaid penalty does not apply to transfers done prior to the 60-month look-back period. That is why planning for long-term care should start 5+ years prior to when it may be required.

See our Medicaid planning guide for details about Medicaid planning. 

How penalty periods are calculated

When the state finds uncompensated transfers within the look-back period, it calculates a penalty period during which you'll be ineligible for Medicaid long-term care benefits.

The formula: Penalty Period (in months) = Total Uncompensated Transfers ÷ State's Penalty Divisor (average monthly private-pay nursing home cost)

Examples:

• A Florida resident gifts $60,000 during the look-back period. Florida's 2026 penalty divisor is approximately $11,000/month. Penalty period = $60,000 ÷ $11,000 = 5.45 months (most states round to the next month, so 5-6 months).

• A New York Long Island resident gifts $100,000 during the look-back period. New York's penalty divisor for Long Island is approximately $14,400/month in 2026. Penalty period = $100,000 ÷ $14,400 = 6.94 months.

• A California resident gifts $200,000 during the look-back period. California's penalty divisor varies but might be approximately $10,000/month. Penalty period = $200,000 ÷ $10,000 = 20 months.

Penalty divisors vary dramatically by state and even by county within states. Higher-cost nursing home states like Connecticut, New Jersey, and New York have higher penalty divisors. Lower-cost states like Mississippi and Alabama have lower divisors.

The penalty period begins on the date you would otherwise be eligible for Medicaid, not the date of the transfer. This creates significant problems for families who didn't plan carefully. You can be denied Medicaid for months or years after applying, during which you must pay for care out of pocket.

There is no maximum penalty period. A transfer of $500,000 in a state with a $10,000 penalty divisor creates a 50-month (over 4-year) penalty period.

California's unique situation

California operates a 30-month look-back rather than the 60-month look-back used in 49 other states plus DC. This is the most significant state variation.

California's situation has been further complicated. From January 1, 2024 through December 31, 2025, California suspended its look-back period entirely. No penalties were assessed for transfers made during this period. Effectively, California had no look-back for two years.

Beginning January 1, 2026, California began reimplementing its look-back period. However, the implementation is gradual rather than immediate:

• January 1, 2026: 0-month look-back begins

• The look-back period gradually expands month by month

• By July 2028 (estimated): California's look-back will reach its full 30 months

This creates a unique planning window for California residents. Transfers made before California's full look-back is restored may benefit from the gradual phase-in. However, the rules are complex; consult a California elder law attorney before making major transfers.

California also eliminated its asset limit from January 1, 2024 through December 31, 2025, but reinstated the asset limit on January 1, 2026 at $130,000 for single applicants (significantly higher than most states' $2,000 limit).

For California Medi-Cal specifics, see our California Medicaid guide.

Exceptions to the look-back rule

There are some key exceptions to this rule where transfers are made penalty-free.

Spousal transfers: All transfers between the spouses are exempt from the look-back rule. The Community Spouse Resource Allowance (CSRA) for 2026 is $162,660, which is the maximum amount that the non-applicant spouse can retain of the couple's combined assets.

Transfers to a child under age 21: No penalties on transfers to your minor child.

Transfers to a blind or disabled child of any age: No penalty for transferring to your blind or disabled child (usually any child receiving SSI or SSDI payments or meeting the child disability definitions in your state).

The Caregiver Child Exemption: If the child takes care of the parent so that the parent can stay home instead of going to a nursing home for at least 2 years prior to the parent's Medicaid application, then the transfer of the primary home to the child is allowed without penalty.

The Sibling Exemption: If a parent has an equity interest in the home and the child has resided in the home for at least one year prior to the parent's placement in a nursing facility, the parent can transfer it to that sibling.

Well-designed Medicaid qualified annuities can be structured so that countable assets are then used to generate income stream payments, without penalty. There are specific requirements: irrevocable, actuarially sound, and remainder benefactor to be the state Medicaid agency.

Irrevocable Medicaid trusts: If properly structured, assets can be protected if funds are placed in trust 60+ months before applying for Medicaid. The transfer to the trust starts the 60-month clock.

If the value of the transfer is less than the fair market value, but can be documented as an exchange (e.g., a loan with proper documentation, terms and interest rate), it may not constitute an uncompensated transfer.

If you need Medicaid planning attorney help, check out our Medicaid planning attorney guide.

How to avoid look-back violations

The best way to prevent look-back violations is by planning 5+ years in advance for potential need.

Begin Medicaid planning when you're healthy. Make an asset transfer plan early, preferably before health issues emerge that would indicate a need for nursing home care in the next 5 years.

Maintain comprehensive documentation. Keep all documentation relating to the sales, bank receipts and transfers. If there is no documentation, there will be a presumption against you.

Use a "Certified Elder Law Attorney (CELA)". Planning for Medicaid is complicated and professional advice is a key to avoiding expensive errors.

If transferring assets during the look-back period is necessary, thoroughly document the transfer and explore asset recuperation options if the transfer will later be deemed as a violation.

If Medicaid spend-down options don't conform with look-back, please consult our spend-down guide.