There is a terrifying moment that happens in our conference room almost every week. A family comes in because a parent has suffered a stroke and needs a nursing home. They tell us, “Don’t worry, Mom doesn’t have any money. She gave her $300,000 savings to us three years ago to keep it safe.”
They think they have protected the money. In reality, they have just triggered the Medicaid Look-Back Penalty. Because of that “gift,” Medicaid will refuse to pay for Mom’s care for nearly two years. The family will have to pay the $20,000 monthly bill out of pocket until the money is gone.
As a New York elder law attorney with over 30 years of experience, I, Russel Morgan, have seen this scenario destroy inheritances. In 2026, the rules are stricter than ever with the full implementation of the 30-month look-back for home care alongside the standard 5-year look-back for nursing homes.
This cornerstone guide will demystify the math behind the penalty. We will explain exactly what triggers it, how New York calculates the “penalty period” based on 2026 regional rates, and the advanced legal strategies—like the “Gift and Note”—that we use to fix mistakes and save assets.
What is the “Look-Back” Period?
Medicaid is a “means-tested” program. It is designed for people who cannot afford care. To prevent people from giving away all their money on Monday to qualify for Medicaid on Tuesday, the government created the “Look-Back Period.”
When you apply for Medicaid in New York, the caseworker reviews all your financial transactions for a specific period of time:
- Nursing Home Medicaid: The Look-Back is 60 months (5 years).
- Community Medicaid (Home Care): As of 2025/2026, the Look-Back is 30 months (2.5 years).
If they find any “uncompensated transfers” (gifts) during this window, they impose a Penalty Period.
How the Penalty is Calculated (The Math of 2026)
The penalty is not a fixed fine. It is a period of time during which Medicaid will not pay. The length of this period depends on how much you gave away and where you live.
The Formula:
(Total Value of Gifts) ÷ (Regional Monthly Rate) = Months of Ineligibility
The Regional Rate (2025/2026 Estimates):
New York State sets a “Regional Rate” based on the average cost of a nursing home in your area. These rates rise every year.
- New York City (5 Boroughs): Approx. $14,200 / month
- Long Island (Nassau/Suffolk): Approx. $15,400 / month
- Northern Metropolitan (Westchester): Approx. $14,500 / month
Example: The Queens Homeowner
Let’s say you live in Queens. Two years ago, you gave your daughter $142,000 to help her buy a condo. Now you need a nursing home.
The Calculation: $142,000 (Gift) ÷ $14,200 (NYC Rate) = 10 Months.
The Result: You are ineligible for Medicaid for 10 months. You must pay the nursing home private pay for those 10 months. Only *after* that will Medicaid kick in.
What Counts as a “Gift”? (It’s Not Just Cash)
The Medicaid auditors are thorough. A “transfer for less than fair market value” includes:
- Writing a check to a grandchild for college.
- Transferring the deed of your house to your children (even with a life estate).
- Adding a child’s name to your bank account (if they withdraw money).
- Donating to a charity or religious institution.
- Selling your car to your nephew for $1.
The “Exempt” Transfers (Safe Harbor):
Not all transfers trigger a penalty. You can transfer assets without penalty to:
- Your Spouse.
- A Child who is certified Blind or Disabled.
- A “Caregiver Child” (who lived in your home for 2 years and provided care that kept you out of a nursing home).
- A Trust for a Disabled Person (under age 65).
The Two Different Penalties in 2026
It is critical to understand that New York now has two different systems running side-by-side.
1. The Nursing Home Penalty (The “Crisis”)
If you need a skilled nursing facility, the penalty starts on the date you are “otherwise eligible.” This means you must be in the nursing home, broke (assets under $31,175), and have applied for Medicaid. Then, and only then, does the clock start ticking on your penalty. It is a harsh rule.
2. The Home Care Penalty (The New Rule)
For home health aides, the 30-month look-back is newer. If you transfer assets and apply for home care, the penalty calculation is the same, but the stakes are often different because you are still living at home. Navigating this new rule is why you need an expert estate planning attorney.
Crisis Planning: How We Fix the Penalty (The “Gift and Note”)
What if you already made the gift? Is it too late? No.
At Morgan Legal Group, we use a strategy called “Promissory Note Planning” (or “Gift and Loan”) to save assets even *after* a crisis strikes.
How It Works:
Imagine you have $300,000 and need a nursing home *today*.
- You gift roughly half ($150,000) to your family. This triggers a penalty.
- You loan the other half ($150,000) to your family in exchange for a rigid Promissory Note that pays you back monthly.
- The loan payments are used to pay the nursing home during the penalty period caused by the gift.
- When the loan is repaid and the penalty expires, Medicaid takes over.
The Result: You saved $150,000 (50% of your assets) despite doing zero advanced planning. This is completely legal, but it requires precise mathematical calculations and legal drafting.
Proactive Planning: Avoiding the Penalty Entirely
The better strategy is to plan ahead.
We create a Medicaid Asset Protection Trust (MAPT). You transfer your home and savings into the trust. This starts the 5-year clock.
- If you stay healthy for 5 years, the assets are fully protected.
- There is no penalty.
- Medicaid pays 100% of your care.
This is why we urge clients to plan in their 60s or early 70s, before a crisis hits.
Conclusion: Do Not Do the Math Alone
The Medicaid Look-Back Penalty is a trap for the unwary. A simple act of generosity to a grandchild can result in the denial of life-saving care. But with the right legal strategy, the rules can be navigated.
Whether you are planning ahead or facing an immediate crisis, schedule a consultation with Morgan Legal Group today. We will crunch the numbers, review your transaction history, and build a plan to preserve your legacy against the high cost of care.
For the exact regional rates for 2025/2026, you can reference the official NY Department of Health Medicaid Updates.
