Posted by Bishop L. Toups | In Elder Law
To be eligible for Florida Medicaid so that Medicaid will pay for either nursing home care, in-home care, or assisted living facility care, an applicant can only have $2,000 (2019) in assets in their name.
If a couple is married and both spouses need to qualify for Florida Medicaid, then they can have $3,000 of assets in their name.
So, how can individuals who have hundreds of thousands of dollars still qualify for Medicaid?
These assets are considered exempt for qualification purposes in Florida Medicaid — meaning these assets do not count towards the $2,000 asset limit.
Qualifications for your state may vary. Check with your charter of Medicaid or an elder law attorney!
Your home is an exempt asset up to $585,000 (2019) for Florida Medicaid.
Your home does not necessarily need to be located in Florida. Your home includes any shelter that you have an ownership interest in and is used as your principal place of residence. The home can be real or personal property, fixed or mobile, and located on land or water. It includes homes, co-ops, condos, mobile homes, motor homes, and houseboats.
Joe purchased his houseboat for $250,000 and has been living in his houseboat since 2005. Other than his houseboat, Joe only has a bank account worth $100,000 and an IRA worth $40,000. Joe needs a high level of care and must go into a nursing home. Fortunately for Joe, his houseboat is his primary residence and is completely exempt for Medicaid qualification purposes.
Empty parcels next to someone’s homestead can also be considered exempt for Florida Medicaid purposes.
If Joe instead owned a home instead of a houseboat and he owned the lot next to his home, the empty lot could still be considered exempt for Florida Medicaid purposes if the lot is directly next to the empty lot and both properties are less than a half-acre in size (if the properties are within a city).
A common question we get is if someone is in a nursing home, will their home still be considered a homestead.
For Florida Medicaid qualification purposes as long as you have an intent to return to your home, then it doesn’t matter how long you are in the nursing home for, your home is your homestead and is an exempt asset.
The answer is yes – as long as you have a spouse or depending who lives in the home or you have an intent to return to the home.
To make a statement of intent to return home all you have to do is make a recorded statement (e.g. affidavit) stating that you intend to return home. If you do not have the capacity to do so, then your designated representative—such as your Power of Attorney—can make the statement for you.
We recommend putting the statement of intent to return home within your Power of Attorney so it is already recorded.
Florida Power of Attorney laws significantly changed in 2011. You will want to have your Florida Power of Attorney reviewed if it was prepared before 2011 or prepared shortly after 2011.
If you or your spouse sell your homestead then your home no longer remains an exempt asset for Florida Medicaid qualification purposes. The exception to this is if you purchase another homestead within three months after the sale of your homestead. If your homestead is being replaced due to loss or damage, then the time limit to replace the homestead is extended to nine months.
Joe decides to sell his houseboat since he is worried about his family not being able to adequately take care of the houseboat while he’s in a nursing home. He uses the proceeds from the sale to purchase a small home within two months of the sale of the houseboat. Because Joe replaced his homestead property with another homestead, the new home is completely exempt for Florida Medicaid qualification purposes.
Joe could run into an issue in the example above if he purchases a new homestead but does not spend any time living in the homestead.
If you sell your homestead before applying for Florida Medicaid, you will have three months starting on the date the Florida Medicaid application is sent in to replace the homestead.
Make sure to use all of the proceeds you receive from the first sale. If you have proceeds left over after replacing the homestead, these proceeds will be countable assets for Florida Medicaid qualification purposes.
Transferring the homestead should only be done in certain circumstances and should be done with extreme caution. If the homestead is not transferred properly the homestead could be considered a non-exempt asset and may have to be spent down.
Florida Medicaid allows transfers of homestead in the following circumstances:
When the homestead is transferred to a sibling who has an equity interest in the home, the transfer is only valid if the sibling both had an equity interest in the home and lived in the home for at least one year prior to the Medicaid applicant going to the nursing home.
Similar to transferring homestead to a sibling, homestead can be transferred to an adult child if the child was residing in the home for at least two years prior to the Medicaid applicant going to the nursing home.
One of the biggest exemptions that people are not aware of for Florida Medicaid is income-producing property, such as a rental property.
Any income-producing property that produces income consistent with its fair market value (e.g. what you should charge for a rental property) is exempt from Florida Medicaid. This exemption includes rental property, farmland, and other personal real property (e.g. machinery) that produces income.
Joe has $400,000 in non-exempt assets that disqualifies him from qualifying for Florida Medicaid. In order for Joe to qualify for Florida Medicaid, his Power of Attorney went out and purchased two separate rental properties for $200,000 each. As long as Joe’s rental properties generate fair market value rent—what someone would typically pay for the rental property—the rental properties are completely exempt for Medicaid purposes.
Even though Joe was able to turn his $400,000 in non-exempt assets into exempt assets, the rental income generated on a monthly basis will be countable income for Florida Medicaid purposes.
The income generated by the rentals can first go toward paying the rental property expenses such as property taxes, utilities, and insurance before the remainder goes towards reimbursing the nursing home.
A life estate interest in a property is excluded for Medicaid purposes as long as the life estate was received 60 months before the application of benefits. The major exception for this is for lady bird deeds. Lady bird deeds when the property is exempt homestead both keeps the property exempt for Florida Medicaid purposes and allows the property to pass outside of probate if the Medicaid applicant passes away.
One common planning strategy is to transfer the homestead to the spouse who will remain in the home before applying for Medicaid.
The transfer is valid because the homestead can be transferred to the spouse at any time and after five years the spouse can sell the property or leave the property to the spouse in the nursing home as a life estate. Since the spouse in the nursing home will only have a life estate interest the children or other beneficiaries can transfer the life estate to themselves and sell the property.
A life insurance policy may be completely exempt for Florida Medicaid purposes depending on the life insurance policy’s face value. If the face value—what the policy will pay upon death—of the life insurance is less than $2,500 then the life insurance policy is completely exempt for Florida Medicaid even if the cash surrender value is more than $2,500.
Joe has had a whole life insurance policy since 1985. The life insurance policy was given to him by his work and has a face value of $2,000. The cash surrender value—what Joe could cash the policy in for—has grown to $30,000 since 1985. Even though the life insurance policy is worth $30,000, Joe can completely exclude the life insurance policy for Florida Medicaid purposes because the face value of the policy is $2,000.
Life insurance that has no cash surrender value—such as term insurance or burial insurance—is completely exempt for Florida Medicaid purposes.
The personal belongings in your home are exempt for Florida Medicaid purposes if the value does not exceed $2,000.
Florida Medicaid maintains a don’t ask don’t tell type of policy. As long as you don’t report any personal belongings worth more than $1,000, Florida Medicaid will not investigate whether your personal belongings are actually worth more than $2,000.
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