1) Does the 5-year look-back period translate into a discrete time period based on the amount of money gifted during that 5-year look-back time? For example, if a person gifted to others a sum of $60,000 in several gifts since late 2016, is that divided by $12,895 to give a "penalty period" of 4.65 months? Or is the penalty period through 2021, 5 years from 2016?
The question can be clarified by understanding the difference between Medicaid’s look-back and penalty periods.
When someone gives a gift within the 5-year period before applying for Medicaid, those gifts are added together and will result in a disqualification. The Medicaid applicant will face a period of benefit ineligibility, known as the penalty period.
The penalty is calculated based on the total amount that was transferred or given away and divided by the penalty divisor within the state. The penalty divisor is the average monthly cost of long-term care in the applicant's state. The penalty divisor in New Jersey for 2018 is $423.95 per day or $12,718.5 per month. Let's use your example of gifting a total of $60,000; the applicant would be disqualified for approximately 4.7 months. The penalty period starts to run when someone applies for Medicaid. Using the five-year lookback, The applicant could wait to apply for Medicaid in 2021 as you suggested and the gifts would not be counted.
Regarding your Irrevocable trust question, you should speak to an Elder Law Attorney for specifics regarding that trust; the Attorney will need to know the type of trust when it was set up, how it was funded, the specific rules outlined in the trust to determine if it is exempt from Medicaid spend down.
So the bottom line is that once the five years have passed following a particular gift(s), that gift will no longer count when the person who made the gift applies for Medicaid. It is important to note that not all gifts cause the imposition of a penalty. Gifts between spouses, gifts to disabled children, and gifts to children who have lived with and cared for the Medicaid applicant for a minimum of two years are not subject to the Medicaid gift rule.