Medicaid is a needs-based benefit program that assists medically and financially qualified individuals with their long-term care expenses. Given that resources are limited to individuals who have a sufficient need, it is important to understand the planning technique for individuals whose finances hover closely to the financial eligibility threshold.
Medicaid applicants will not be disqualified for spending down assets to reduce the total value of assets before applying for Medicaid.
It’s a very useful option, but it comes with a lot of misunderstandings. For example, people often think they can only spend their assets on long-term care. But many expenses are justified and will not cause penalties for Medicaid eligibility in Florida.
Please always consult a Florida elder law attorney before making financial decisions. In this blog, we’ll explain what’s available:
How Can I Safely Spend Down My Assets Before Applying for Medicaid?
Medicaid eligibility in Florida comes with strict income limits and asset limits. If your total asset value closely exceeds that limit, you can consider ‘spending down’ to meet the limit. Spending down should be done with caution, as you can face transfer penalties and application bans for a period of time for breaking the rules. Lying about asset transfers can also be a felony.
Spending down rules vary with each state, so make sure what you read is information specific to Florida.
Read Florida’s Medicaid asset and income limits for 2023 here.
Florida Spend Down Rules for Medicaid
There are rules that must be followed:
- You cannot gift assets within 5 years of the Medicaid application. Gifting assets means transferring money or property for less than ‘fair market value.’
- Sales of assets must be for a ‘fair market value.’ For example, you cannot sell a house to your son for $10.
Medicaid Lookback Period in Florida
Florida’s Medicaid lookback period is a process where the applicant’s asset and income transfers are analyzed over the previous 5 years from the date that the application is submitted.
Put simply, the applicant should never gift or sell assets for under a fair market value in the 5 years before the application. We advise that you always consult a Florida elder law attorney before doing so to avoid making a costly mistake.
How to Safely Spend Down Your Assets for Medicaid Eligibility in Florida
To spend down your assets before applying for Medicaid in Florida, you must ensure that it is for an eligible expense. Some common examples of eligible expenses include:
Read Related: Top Reasons Florida Medicaid Applications Are Denied
Debts
Any legitimate debt that the applicant is obliged to pay is an allowed expenditure. For example, if you have mortgage payments, medical expenses, credit cards, taxes, rent, utilities, car payments or other debts, you can spend these. Debts can be paid fully or partially. When it comes to pre-payments, the applicant can typically pay off the loan as they’re legally obligated by a contract to pay it off.
Spending on Non-Countable Assets
Exempt assets can also be safely purchased. For example, you can still purchase a new home (if within the valuation limits) or replace an old vehicle with a newer one. Personal property, such as furnishings and medical equipment is also fine.
Should you need to make any payments to maintain or improve a non-countable asset, you can also do that. For example, many people spend down their assets by making home improvements or repairs. This can be especially useful if you need to add safety or medical improvements.
Funeral or Burial Expenses
Florida allows for the pre-payment of some burial and funeral expenditures. However, please consult a Florida elder law attorney first to ensure you are within the regulations.
An Example of Spending Down for Florida Medicaid Eligibility
Example A:
Chris, widowed and aged 84, has an illness and needs long-term nursing home care. The family attempts to get Florida Medicaid support this year but discovers that Chris’ assets exceed the Florida asset limit of $2,000.
Chris has:
- A home worth $400,000 (so less than the $688,000 countable limit)
- A car with an outstanding loan of $8,000
- $12,000 in his bank.
His home and car are non-countable assets, but his $10,000 savings are countable. So may spend it down on eligible expenses.
The family can pay off Chris’ vehicle’s loan of $8,000 using the funds in his bank and purchase a burial policy for him valued at $2,500. Chris now only has $1,500 in his bank account, so he is financially eligible for Florida Medicaid long-term care services.
Example B:
Linda’s family believes Linda and her husband will need nursing home care within the next 10 years.
Linda and her husband, both aged 70, have:
- $50,000 in their bank account
- A second real estate property in South Florida.
They speak to an elder law attorney about planning for long-term care, and they realize they are far above the $3,000 asset limit for married couple applicants.
The elder law lawyer advises that they plan now to avoid taking action during the five-year look-back period.
They decide to put their second property in a Medicaid Asset Protection Trust and spend $30,000 on replacing their car and taking a holiday to Paris. This leaves their bank account at $20,000. Linda and her husband have many options when they pre-plan for their long-term care, and if they choose to, they can shelter all of their funds rather than spend them down. However, they do not make any more transfers or gifts in the next 5 years to ensure they do not violate the Medicaid look-back period.
Aged 75, they then decide to apply for Florida Medicaid. However, their account still has $15,000 in excess assets. So they spend $10,000 on improving their home and $2,000 on funeral policies. Their bank account now has just $3,000 so they are eligible for Florida Medicaid.
What Are the Countable Assets in Florida?
Assets that count towards the applicant’s asset value are called ‘Countable Assets‘. This includes:
- All financial accounts
- Bank Accounts
- Certificate of Deposits
- Brokerage Accounts
- Bonds
- Savings Accounts
- Retirement Accounts not in payment
- And more
- Jointly Held Accounts
- Cash value in life insurance policies (if the policy’s face value exceeds $2,500).
- A second car, under 7 years old.
- Vacant land
- Assets held in revocable living trusts
- Real estate (not including a homestead and one rental property, read below for value).
What Are Non-Countable Assets in Florida?
Assets that are not calculated in the applicant’s total Florida Medicaid asset limit are called ‘non-countable assets’. These include:
- Homestead property, valued under $688,000 (2023) for a single person, or unlimited for married couples.
- Anyone with unlimited value.
- Second car over 7 years old (unless a collector’s car)
- Irrevocable funeral or burial policies
- Some Individual Retirement Accounts (IRAs)
- Personal property
- Burial accounts set aside with less than $2,500
- Life insurance with a face value of less than $2,500
Hire an Elder Law Attorney in Riverview for Medicaid Eligibility in Florida
If you or a loved one needs assistance applying for Florida Medicaid or has any questions, our Florida Medicaid planning lawyers can help. It’s advised that you take action sooner rather than later, as delaying can cause you to miss out on Medicaid long-term care planning opportunities.
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