Pitfalls of the nursing home five year look back period?

A five-year look-back period retroactively for all gifts or other transfers made for less than fair market value (FMV).

Grandfather made gifts of $200 to each of his five grandchildren on each of their birthdays and on one of their religious holidays in 2006, 2007, 2008, 2009 and 2010. He is unaware of the Medicaid laws. Grandfather requires nursing home care.

Under the Medicaid rules, Grandfather is penalized for all gifts made within a five year period. Therefore, Grandfather is penalized for approximately one and a half months, during which time Medicaid will not pay for his care in the nursing home. Grandfather has no other funds to pay for his care. Consequently, who will pay for his care? Grandfather has no funds, and the children and grandchildren have no legal obligation to pay the nursing home. Therefore, the nursing home will likely not receive payment for the one and half months. Accordingly, if this occurs to a resident, who has gifted more assets, or several residents to the same nursing home, the nursing home will have major financial difficulties. Additionally, the nursing home may be reluctant to accept prospective residents. Therefore, seniors who are unable to pay privately for nursing home care will find it difficult, or even impossible, to find a nursing home to accept them. Further, and most alarming, the senior may be legally discharged from the nursing home for non-payment of his bill. And where will the Grandfather go, on the street?