a picture of a house miniature in a human hand, the background with street houses and the phrase "Strategies for Selling a House While Receiving Medicaid"

Strategies for Selling a House While on Medicaid

Many Florida Medicaid recipients are faced with the complexities of selling a house while on Medicaid benefits.  Often, a Medicaid recipient may need to sell a house because they do not have the money to pay for its upkeep, property taxes or other real estate-related costs. 

However, remaining financially eligible for Medicaid after receiving the proceeds from a house sale requires following a well-executed legal strategy led by an experienced Florida Estate Planning or Elder Law attorney. 

This is because one of the core concepts of Medicaid eligibility is that recipients need to have limited assets and income at the time of application, then maintain limited assets and income in order to remain eligible.

Before looking at the legal strategies involved, it is useful to look at Medicaid’s financial eligibility requirements.   

Asset Limits

People applying to and wishing to remain eligible for Medicaid cannot own assets over a certain amount.  There are exceptions to this rule, so assets can be categorized as either countable assets (that count against one’s Medicaid eligibility) and non-countable assets (that do not count against one’s eligibility).  

According to Florida Medicaid 2024 rules, an applicant’s homestead residence is considered a non-countable asset as long as the equity in that asset does not exceed $713,000.  In order to qualify for this exception the Medicaid recipient and or their spouse needs to live on the property.  It is also acceptable that the recipient does not live there currently but intends to return to live on the property after treatment. 

In all of these cases, if the homestead remains unsold, then the house remains a non-countable asset for purposes of Medicaid. However, cash balances are considered countable assets, so if a Medicaid recipient sells a homestead, they effectively are converting a non-countable asset to a countable asset and risk losing their Medicaid eligibility. The maximum total of countable assets a Medicaid recipient may own is $2,000 – an amount far less than what a typical person receives when they sell a home.

Fortunately, there are asset management strategies that make a house sale possible for Medicaid recipients who wish to continue their coverage.

Income Limits

According to Florida Medicaid’s 2024 limits, a total of up to $2,829 in monthly income is permitted for a Medicaid recipient to remain eligible.  This amount is far beneath what the typical seller of a house will receive if they sold a property in Miami in 2024.  However, there are income structuring strategies that can be used to legally protect the home from a house sale and keep the seller eligible for Medicaid. 

Look-back Period

Medicaid recipients cannot give away their assets to family members, friends or business entities and remain qualified for Medicaid. This includes any transfer of assets to any other party for less than the asset’s fair market value. 

This is because of the Five Year Lookback Period rule, which requires that all such transfers be completed 60 months prior to the date that a Medicaid application is made.  This rule continues to apply during the duration in which someone receives medicare benefits.

Due to the Five Year Lookback Period rule, a Medicaid recipient cannot simply transfer a house to their offspring and expect to remain eligible for Medicaid.  If they did so, they could lose their Medicare benefits and not be eligible again to receive them for at least the next five years.

“…there are income structuring strategies that can be used to legally protect the home from a house sale and keep the seller eligible for Medicaid.” 

Medicaid Estate Recovery

Florida Statutes 409.9101 allows the state to seize the property of certain Medicaid recipients upon their death in order to recover the costs of the Medicaid benefits provided to that individual during their life.  With long-term care costs often totaling over $100,000 per year, and with the average nursing home resident living about three years, this can result in a significant sum being removed from the Medicaid recipient’s estate. 

The Pros and Cons of Various Strategies

There are a number of strategies that can be used to legally protect the assets and income of Medicaid recipients and applicants.  Each strategy depends on the circumstances of the individuals and their families.  There is no cookie-cutter solution for anyone, each strategy must be planned and executed differently according to specific needs.

Strategies may:

Have differing tax benefits and consequences, 

Require the Medicaid recipient’s estate to pay back some money to the state 

Involve varying levels of asset liquidity

Oblige recipients to hold assets in trust until after they have died

The Importance of an Attorney

The legal remedies that protect assets and income when selling a house as a Medicaid recipient require advanced planning by an experienced legal professional in the Elder Law and Estate Planning practice areas. To avoid pitfalls that can result in Medicaid ineligibility, tax consequences and recovery of your house by the state, it is important not to try to “go it alone”.  Medicaid recipients and their families are best equipped to handle these matters when they work with experienced legal counsel. 

South Florida Law

Your property and other valuable assets form an important part of what you pass on to loved ones. At the same time, Medicaid presents the opportunity to save significant amounts in long-term care costs but it can also present a threat to your assets if it is not planned correctly. We assist in planning for Medicaid coverage later in life including assistance with completing Medicaid applications and restructuring assets to protect your family home from the Medicaid Estate Recovery Program. 

The attorneys of South Florida Law, PLLC have the experience and resources to handle complex estate planning and Medicaid planning matters in the following areas:

  • Selling a home or investment property while receiving Medicaid
  • Management of cases through probate
  • Drafting of official wills and formation of trusts
  • Matters related to creditor access
  • Medicaid application preparation
  • Appealing unsuccessful Medicaid applications
  • Avoiding losing your home due to the Medicaid Estate Recovery Program

If you are in the process of applying for Medicaid in Florida and have assets and income to protect contact us today for a consultation by calling (954) 900-8885 or reach out via our contact form.

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