Can The Medicaid Lookback Period of 5 Years Be Avoided
Under Medicaid's lookback rules (5 years for most states), any transfers into an irrevocable trust during the lookback period are considered a gift to the trust and result in a penalty. The limitation of asset transfers is not based on taxable income, but rather market value of said assets alone being transferred.
To reduce one's assets for the lookback period, set aside money for the sole purpose of funeral and burial costs with a "Irrevocable Funeral Trust." Alternatively, purchase a Medicaid Annuity or Medicaid Compliant Annuity as this typically will not violate lookback rules, but each state is different.