Dear Len & Rosie, I understand that Medi-Cal has a five-year look back period. But what exactly does that mean? My parents (90 and 85) live on their own and have about $200,000 in assets, no house. This year they plan to give each of their children $20,000. What happens if before the five-year period, they need to go into a nursing home or need financial assistance? They spoke to an estate planner four years ago but didn’t follow any of her advice. What will happen if Medi-Cal looks back at their finances? - Sandy

Dear Sandy, Medi-Cal planning is more complicated than you think. First of all, there’s no five-year look back period. Yet. Yes, federal law was changed. Under the Deficit Reduction Act enacted on Feb. 5, 2006, a Medi-Cal applicant has to disclose any “transfers” (gifts) made in the five years prior to applying for benefits. Each gift triggers a “transfer penalty period” delaying the start date when the applicant gets benefits.

California has not implemented this rule. With a couple of minor exceptions, Medi-Cal eligibility is determined by reference to a Medi-Cal Eligibility Workers Manual based on a set of proposed regulations that the California Department of Health Care Services imposed as an emergency measure in January 1990. These regulations were drafted to comply with changes in federal law that were enacted in 1988, and have never been officially confirmed through the regulatory process. When will the new five-year look back period be imposed? We’re not holding our breath.

That’s actually in your favor. Under the new rules, if and when they are implemented, it will be more difficult to qualify a person for Medi-Cal benefits through Medi-Cal planning. There will be a five-year look back period rather than the two-and-a-half year look back period in effect today. Even worse, transfer penalties will be start as of the date of the Medi-Cal application rather than the date the gifts or transfers were made.

What commentators are fairly sure of is that when the new rules are finally imposed, they won’t be imposed retroactively. That would create an unworkable mess. Right now, if your parents give away $20,000 to each of their children, there will be a three-month period of eligibility for long-term nursing home Medi-Cal benefits, starting on the first day of the month in which the gifts are made. So if they give the money away now, four months from now either of them could apply for Medi-Cal without penalty.

Despite all this, your parents shouldn’t be so fast to give their money away. Medi-Cal pays for nursing home care, not for assisted living, residential care, or other forms of care that provide a better quality of life to seniors. If a parent already suffers from an illness that is more likely than not to put him or her into a nursing home some day, then working to qualify your parents for Medi-Cal may be a good idea. But we can’t recommend that your parents give away their life savings to their children in the off chance that they may eventually need nursing home care. They may need the money to keep themselves out of a nursing home.

If your parents are set on gifting, they should consult with an elder law attorney and discuss other alternatives such as gifting money to an irrevocable trust.