One of the most common (and stressful) situations we see at Generations Legal Group is this:
A loved one is about to enter a nursing home. The family is told they need to apply for Medicaid
immediately. They come to us in crisis mode—and there is no Power of Attorney, multiple bank
and investment accounts are scattered everywhere, gifts have been made to children or
grandchildren, and documentation is missing.
At that point, we can still help. But it is much harder, more expensive, and far more stressful than
it needed to be.
If you or your spouse may need long-term care within the next few years—even if it’s “probably
not more than five years away”—this is the time to plan. The five-year Medicaid look-back
period makes early action critical.
Let’s talk about why.
1. No Power of Attorney = Immediate Delays
If someone needs Medicaid now and does not have a valid Power of Attorney (POA), we cannot
legally access accounts, gather records, or implement planning.
If the person still has capacity, we must prepare and execute a POA. That takes time.
If capacity has already been lost, the family may need to pursue a guardianship through the
court—a process that is costly, public, and time-consuming.
Pre-planning takeaway:
Have a properly drafted Medicaid-compliant Power of Attorney in place long before a crisis. Not
all POAs contain the powers necessary for Medicaid planning.
2. Too Many Accounts = Documentation Nightmare
When applying for Arkansas Medicaid, the Department of Human Services (DHS) will require:
At least three months of bank statements for every account
Often much more
And in many cases, the documentation going back five years
Every checking account.
Every savings account.
Every CD.
Every brokerage account.
Every IRA distribution account.
If there are ten accounts, that means tracking down statements from ten different institutions. If
statements are missing, we must request archived records. That slows everything down.
Pre-planning takeaway:
Simplify. Consolidate accounts where appropriate. Fewer accounts mean fewer records to gather,
fewer questions from Medicaid, and faster approvals.
3. Married Couples: Income Must Be Structured Correctly
For a married couple, income handling is critical.
When one spouse applies for nursing home Medicaid:
The Medicaid applicant must remain under the monthly income cap (as last provided by
our firm, Arkansas uses an income cap system; these figures update each April and
should be verified with Arkansas DHS or by calling our office at 479-601-4119).
The applicant must also remain under $2,000 in countable resources (this resource limit
updates periodically and should be verified).
Two common problems we see:
1. Both spouses’ income deposited into one joint account
2. Social Security deposited into an account where the applicant’s name is not listed
To properly manage income eligibility:
Each spouse’s income should go into a separate account.
The Medicaid applicant’s income must be clearly traceable.
The applicant’s name must be on the account receiving their Social Security.
Failing to structure this correctly can cause delays and eligibility issues.
4. Payments to Family Members = Potential Gifting
Problems
This is one of the most misunderstood issues.
If the applicant (or spouse) has been making payments to a child or grandchild—for any
reason—Medicaid will examine those payments closely.
If there is no written contract created before the payments began, Medicaid will treat those
payments as gifts.
This includes:
“Helping out” a child
Paying a grandchild’s bills
Informal caregiver payments
Covering rent or utilities
Regular Venmo or check transfers
Important clarification:
A gift does not permanently disqualify someone from Medicaid.
Instead, Medicaid applies a penalty period based on the amount gifted. In Arkansas, the
Medicaid gifting penalty divisor is $8,853 per month (as last provided by our firm). This
figure updates annually in April and should be verified with Arkansas DHS or our office.
The penalty divisor is used solely to calculate the length of a transfer penalty. It is not the
private-pay cost of a nursing home, which varies by facility and level of care.
Many families wrongly assume:
“We made gifts. That means we can’t apply for five years.”
That is not true.
You can still apply within the five-year look-back period. We simply address the gifts
strategically and determine how to handle the penalty period.
5. Forgotten Life Insurance Policies with Cash Value
Another common surprise: life insurance policies.
Medicaid does not care about the death benefit amount.
It looks at the cash value.
Many older adults:
Have multiple small policies.
Have policies they forgot about.
Don’t know whether a policy has cash value.
Every policy must be identified and documented. If there is cash value, it may be countable
unless properly handled.
Pre-planning takeaway:
Locate every policy early. Determine whether it has cash value. Address it before crisis planning
is required.
6. Titled Property Problems
Medicaid will review anything with a title:
Cars
Boats
Trailers
Campers
ATVs
Vacant land
Often, we find:
Abandoned vehicles still titled in the applicant’s name.
Non-running vehicles.
Trailers that no longer exist.
Old campers sitting on someone else’s property.
If it’s titled in their name, Medicaid counts it based on the state’s valuation—not what you think
it’s worth.
Those items need to be:
Located
Properly valued
Sold, transferred appropriately, or removed from title records
Cleaning this up takes time—time that families often do not have in a crisis.
7. Misunderstanding the Five-Year Look-Back
The five-year look-back does not mean:
You must wait five years to apply.
You are automatically disqualified if gifts were made.
Planning is pointless if you are already inside the five-year window.
It simply means Medicaid reviews transfers made within the previous five years and may impose
a penalty period based on the total uncompensated transfers.
There are often planning strategies available—even in a crisis.
Additional Issues We Frequently See in Last- Minute Applications
In addition to the concerns above, here are other common problems:
1. Missing Documentation
DHS may request:
Five years of bank statements
Proof of deposits
Copies of checks
Closing statements from sold property
Proof of burial arrangements
IRA payout documentation
If documentation cannot be produced, approval may be delayed or denied.
2. Incorrectly Titled Accounts
Accounts may be:
Joint with a child (creating ownership confusion)
Missing the applicant’s name
Structured in a way that complicates eligibility
Joint accounts with children are especially problematic because Medicaid may treat the entire
account as belonging to the applicant unless proven otherwise.
3. Retirement Account Mistakes
Improperly structured IRAs can:
Push income over the monthly cap
Cause resource eligibility issues
Trigger unnecessary penalties
Retirement accounts must be reviewed carefully and sometimes converted into compliant payout
structures.
4. Real Estate Complications
Issues can include:
Undivided mineral interests
Partial ownership in inherited property
Old family land still in the applicant’s name
Quitclaim deeds that were never recorded
These often surface at the worst possible moment.
5. Failure to Plan for the Well Spouse
When one spouse enters a nursing home, the healthy spouse (the “community spouse”) is entitled
to keep certain assets and income allowances under federal and state law.
Without proper planning:
The healthy spouse may lose more than necessary.
Income may not be properly allocated.
Long-term financial security can be jeopardized.
These allowance figures update periodically (typically each April in Arkansas) and should
always be verified with DHS or our office at 479-601-4119.
The Bottom Line: Crisis Planning Is Harder Than Pre-Planning
We can help in a crisis. We do it every week.
But pre-planning:
Reduces stress
Preserves more assets
Speeds up approval
Protects the healthy spouse
Avoids unnecessary penalties
Keeps families out of court
If long-term care is even remotely on the horizon within the next few years, that is the time to
organize:
Execute a strong Power of Attorney
Consolidate accounts
Separate spousal income
Identify life insurance
Clean up titled property
Review gifting history
Develop a proactive Medicaid strategy
Waiting until the nursing home admission date makes everything harder.
Final Thoughts
The biggest myth we see is this:
“It’s too late. We already made gifts.”
Or:
“We’ll just wait until we need it.”
Both assumptions cost families money.
The five-year look-back is not a wall—it’s a planning framework. Even inside that window,
strategies often exist.
If you or a loved one may need long-term care within the next five years, now is the time to
plan—not when the nursing home says, “You need to apply this week.”
For personalized guidance tailored to Arkansas Medicaid rules, contact Generations Legal Group
at 479-601-4119. Our team works with families across Northwest Arkansas and is expanding our
reach statewide.
(As a reminder, Medicaid figures and eligibility thresholds are updated periodically—typically
each April in Arkansas. Always verify current numbers with Arkansas DHS or by calling our
office.)
