Understanding the 5-Year Look-Back Rule: What Michigan Families Need to Know About Medicaid Spend-Down

What Is the 5-Year Look-Back Rule?

When someone applies for Medicaid to help pay for nursing home or in-home care, the State of Michigan reviews all financial transactions over the five years preceding the application. This is called the look-back period.

During this time, the state checks for any assets that were:

• Given away (to children, grandchildren, etc.)
• Sold for less than fair market value
• Transferred out of your name without compensation

If the state finds any such transactions, you may face a penalty period—a span of time during which Medicaid will not pay for your care, even if you otherwise qualify.

What Triggers a Penalty?

For example, imagine you gave your adult child $50,000 three years ago to help with a down payment on a house, or you transferred ownership of your home to a family member without receiving any payment in return. These types of transactions would be flagged when you apply for Medicaid and could delay when your benefits begin.

The penalty period isn’t just a technicality—it’s a real stretch of time without Medicaid coverage, during which families are often forced to pay care costs out of pocket.

Does This Mean I Can’t Give Gifts Anymore?

Not at all. It just means that gifting or transferring assets within five years of applying for Medicaid can have consequences if not done correctly. That’s why early planning matters. With the right tools and guidance, you can still protect your assets and support your family—without risking Medicaid eligibility.

Innovative Strategies That Can Help

If you’re looking ahead, some options balance care needs and asset protection:

• Irrevocable Trusts: By placing assets into an irrevocable trust before the five-year mark, you may remove them from your “countable” assets while preserving a future inheritance for loved ones.
• Caregiver Agreements: These formalize payments to family members who provide care, allowing money to be transferred without violating Medicaid rules—when done correctly.
• Strategic Spend-Downs: Legally reducing your assets in ways that align with Medicaid guidelines—like prepaying for funeral expenses or making home modifications.

But these approaches require planning and proper documentation. They’re not something to Google the night before submitting a Medicaid application.

Why Now Is the Right Time to Plan

Too many families wait until a crisis hits to start the Medicaid conversation—and by then, options are limited. The five-year look-back clock can’t be rewound, but it can be started early.

If you’re approaching retirement, supporting aging parents, or even just thinking ahead, now is the time to understand your choices.

Let’s Protect What Matters—Before It’s Too Late

We help Michigan families every day navigate Medicaid eligibility and asset protection without panic. Whether you’re planning years in advance or already seeing signs that care might be needed soon, we’ll help you understand your position and build a smart, ethical path forward.

Start the conversation today. Your future self—and your family—will thank you.