Long-term care can be very costly and it can quickly deplete a person’s life savings. Medicaid can help cover the costs of a nursing home, but only if the person going into care has limited resources. When someone owns a home, it is thus natural to be concerned about whether the home will be lost if nursing home care becomes necessary. However, in Florida, any homestead with an equity value of $688,000.00 or less is an exempt asset for Medicaid purposes.
Often, parents own a home and give it to their children before going into a nursing home with the intention of “protecting” the home. Such a transfer could create significant tax implications and could potentially cause them to be disqualified for Medicaid. Therefore, while parents may have good intentions, the transfer of the home could have negative effects, while not being necessary to “protect” it.
When an asset, whether a home or otherwise, is transferred to children or to anyone else for less than fair market value, it can result in a delay in Medicaid eligibility for nursing home coverage. The uncompensated transfer creates a “penalty” period under Medicaid rules. The penalty period is a length of time that Medicaid would not help pay long-term care costs for the applicant.
The length of the penalty period varies according to the value of the uncompensated gift. The total value of transferred assets is divided by the average cost of a nursing home in the applicant’s area as set by Medicaid to determine the number of months for which the applicant is disqualified from Medicaid coverage. For 2023, that divisor amount is $10,809. For example, if a property worth $100,000 is transferred without value given then the applicant is disqualified for Medicaid coverage for long-term care for 9.25 months ($100,000/$10,809= 9.25).
Medicaid has a look-back period of five years. When applying for Medicaid, any gifts made by the applicant or their spouse within the last five years are required to be reported. When Medicaid determines that the applicant meets all criteria for eligibility except for the gift, then the penalty period is applied and benefits are delayed.
There are planning techniques that can be used to avoid being denied for Medicaid while still protecting the money and assets acquired over the course of your lifetime. Our elder law attorneys also provide you with estate planning advice within the Medicaid planning process.
Call the Elder Law Firm of Clements & Wallace, P.L. to schedule a consultation with an elder law attorney to learn more about how to protect your assets while still qualifying for long-term care coverage.
Editor’s Note: This post was originally published in May of 2015 but, as of September 2023, has been edited for accuracy and comprehension