A client's mother has early-stage Alzheimer's and $280,000 in assets. The family wants Medicaid to cover nursing home costs. If you do not understand the five-year lookback, you will give advice that leaves the mother ineligible with no money to pay for care.
Clients and exam questions conflate these constantly. Medicare is federal, not means-tested, and does not cover long-term custodial care. Medicare Part A covers skilled nursing up to 100 days after a qualifying 3-day hospital stay, but only for skilled medical needs, not help with daily living.
Medicaid is a joint federal-state, means-tested program that covers long-term custodial care. For a single applicant, countable resources must fall below approximately $2,000. For married couples, the Community Spouse Resource Allowance (CSRA) lets the at-home spouse retain up to approximately $154,140 (2026).
HIGH-FREQUENCY: This distinction is one of the most heavily tested concepts. Medicare handles medical. Medicaid handles custodial.
Not all assets count. Exempt from Medicaid's resource calculation:
- Primary residence (up to ~$713,000 equity in most states, ~$1,071,000 in states with the higher limit)
- One automobile
Common mistakes
- Confusing first-party and third-party SNTs. The distinction turns on whose money funds the trust. Beneficiary's money = first-party = Medicaid payback. Family's money = third-party = no payback. Trap: "no Medicaid payback" for a trust funded with the disabled person's own inheritance.
- Assuming the home is permanently safe. The home is exempt for eligibility during the recipient's lifetime. After death, MERP reclaims costs from the estate. Trap: "the home is fully protected."
- Believing ABLE accounts replace SNTs. ABLE accounts work for small amounts ($100,000 SSI-safe, $19,000/year). SNTs handle larger sums with more investment flexibility. Third-party SNTs avoid payback entirely. They complement each other.
Bottom line
- Medicare is federal, not means-tested, and covers only skilled care (100-day max), never long-term custodial care.
- Medicaid is means-tested and does cover long-term custodial care. Asset limit ~$2,000 single.
- Community Spouse Resource Allowance: ~$154,140 (2026) protects the at-home spouse from impoverishment.
- Five-year lookback: gifts within 60 months trigger a penalty period that starts at the eligibility date, not the gift date.
Exam shortcut
SNT source rule: "Whose Money? Whose Payback?" Beneficiary's = first-party = payback. Family's = third-party = no payback. Lookback: "5-60-Eligibility" (5 years, 60 months, penalty starts at eligibility). Exempt assets: "CHOP-B" (Car, Home, Odds and ends, Prepaid burial, Below-threshold life insurance). "DPOA prevents the courthouse." Guardianship is last resort when no DPOA exists.
The full lesson (about 2,476 words, 17 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- F.46
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