What is the 5 or 5 rule in estate planning?


Share This Post:


Regarding estate planning in New York, individuals often encounter various rules and regulations that govern how their assets are transferred to heirs and beneficiaries. One such rule is the “5 or 5 Rule.” Understanding this rule is crucial for creating an effective estate plan that aligns with New York’s legal requirements. At Morgan Legal Group P.C., we specialize in estate planning services in NYC and can provide expert guidance on how the 5 or 5 Rule may impact your estate planning decisions.

What Is the 5 or 5 Rule?

The 5 or 5 Rule, also known as the “Medicaid Transfer Penalty” rule, is a regulation established under New York’s Medicaid program. It pertains to the transfer of assets as part of Medicaid planning. Medicaid is a government program that provides healthcare coverage to eligible individuals with limited financial resources. To qualify for Medicaid benefits, an individual’s financial assets must fall below a certain threshold.

How the Rule Works

The 5 or 5 Rule sets specific limitations on asset transfers for Medicaid eligibility. Here’s a breakdown of how it works:

  1. A penalty period may be imposed if you transfer assets within the five-year look-back period before applying for Medicaid.
  2. The penalty period is calculated based on the total value of the transferred assets divided by the average monthly cost of nursing home care in your area.
  3. You will be ineligible for the penalty period for Medicaid coverage for nursing home care. You will need to cover your long-term care expenses using your own resources.
  4. The length of the penalty period depends on the value of the transferred assets. For example, if you transferred assets equivalent to ten months of nursing home care, you would face a ten-month penalty period.
  5. The penalty period begins on the date of your Medicaid application and when you are otherwise eligible for Medicaid coverage.

Exceptions and Exemptions

It’s important to note that exceptions and exemptions to the 5 or 5 Rule exist. Certain asset transfers may not result in a penalty. These include transfers to:

  • Your spouse.
  • A disabled or blind child.
  • A trust for the benefit of a disabled or blind individual under age 65.
  • A trust for the sole benefit of someone under age 65 who is permanently disabled.

Why Is the 5 or 5 Rule Important?

The 5 or 5 Rule is essential to consider in your estate planning because it directly impacts your eligibility for Medicaid coverage, particularly for long-term care services in a nursing home. Failing to understand and navigate this rule correctly could lead to unexpected financial burdens if you require nursing home care and are disqualified from Medicaid benefits due to asset transfers within the look-back period.

Estate Planning Strategies

Given the complexities of the 5 or 5 Rule, effective estate planning is crucial to ensure that your assets are protected and that you can access necessary healthcare services. Some strategies to consider include:

  • Advance planning for long-term care needs may include purchasing long-term care insurance.
  • Consult with an experienced estate planning attorney to develop a comprehensive plan for Medicaid eligibility and asset protection.
  • Exploring legal methods for transferring assets that comply with Medicaid rules.


The 5 or 5 Rule is a critical aspect of estate planning in New York, especially for those concerned about Medicaid eligibility and the potential need for long-term care services. To navigate this rule effectively and make informed decisions, it’s advisable to consult with a knowledgeable estate planning attorney. At Morgan Legal Group P.C., we have the expertise to guide you through the complexities of estate planning in NYC and help you create a plan that aligns with your financial goals and healthcare needs.

DISCLAIMER: The information provided in this blog is for informational purposes only and should not be considered legal advice. The content of this blog may not reflect the most current legal developments. No attorney-client relationship is formed by reading this blog or contacting Morgan Legal Group.

Got a Problem? Consult With Us

For Assistance, Please Give us a call or schedule a virtual appointment.