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Calculating the Florida Medicaid Transfer Penalty

In order to receive nursing home or assisted living Medicaid in Florida, the applicant must not have given away (i.e., made "uncompensated transfers") assets within five years of applying for Medicaid benefits.  This is generally known as the Medicaid “look-back” period.  The rule makes complete sense as Medicaid is a “needs-based” program that only assists those who fit into very strict income and asset levels.  Medicaid income and asset qualification levels are listed on our Medicaid planning page.

In the event a Medicaid applicant transferred money away with the five year "look back" period, the State of Florida will generally assess a transfer penalty based upon the amount of money transferred.  The reason for the transfer penalty is that money given away should have been used to care for the elder, so the Department of Children and Families (DCF) will assess a time period penalty that provides Medicaid ineligibility. The period of ineligibility for Medicaid is determined by dividing the amount of money given away by the average monthly private pay nursing home facility rate at the time of the Medicaid application. As of June 1, 2017, the transfer penalty divisor is $8,944/month.  The following is an example of calculating the Medicaid transfer penalty:

Mom makes an uncompensated transfer of $100,000 on January 1, 2016 so that she leaves an inheritance to her children. Mom has a stroke 10 months later. On January 1, 2017, Mom is now in a nursing home and her Medicare rehabilitation days have run out.  She then applies for Medicaid as she is out of money.  Her countable assets now do not exceed $2,000 and her income is below the income cap. Because of the gift, a Medicaid transfer penalty is calculated as follows: $100,000/$8,944 = 11.18 months (i.e., the amount of the gift divided by the penalty divisor = the penalty period). Thus, because of the transfer, mom will not be eligible for Medicaid benefits until mid-November, 2017, some 11.18 months after she eligible and has applied for Medicaid.

In this example, if the children simply give the money back to mom, the transfer penalty will go away. Mom will now have $100,000 and will now be ineligible for Medicaid because she is now over the asset cap.  Of course, with a good elder law attorney, the family may be able to legally protect her assets even though she is already in the nursing home. Here are some quick questions on protecting assets if the elder is already in the nursing home. The transfer penalty period only starts to run at the time of the applicant is eligible for, and has applied for, Medicaid.

An important aspect to gifting is that there is no de minimis exception for small gifts.  Christmas and birthday gifts to family are considered transfers for Medicaid purposes and they should be disclosed on a Medicaid application. The first gifting rule is that uncompensated transfers are presumed to have been done for Medicaid/asset protection purposes. This is a rebuttable presumption with the Department of Children and Families. Importantly, even if small gifting has been done, hiring an elder law attorney will be important as part of the Medicaid process.  

Further, the federal annual gift tax exclusion, set at $14,000 in 2017, does not apply to Medicaid planning. The annual gift tax exclusion is the amount of money you are allowed to transfer away without either paying gift taxes or filing a gift tax return. Only if you transfer funds over the lifetime exemption (some $5.49 million in 2017) will gift taxes be due. But the federal gift tax exclusion has nothing to do with Medicaid transfer penalties - you are not allowed to transfer away $14,000 per year to beneficiaries without a Medicaid transfer penalty.

True Story: A family came in to see me regarding their elderly father who just had a stroke and was in the nursing home. He was not going to be able to go home and would need to stay in the nursing home due to poor health. For the past 5 years, the family had gifted $14,000 per year to each child based upon bad advice from their CPA. It was not a pleasant situation to inform the children that they had to give the money back in order to negate the transfer penalty. Luckly for the family, they hired our office and with some creative legal advocacy, we helped negate the transfer penalty while getting their father on Medicaid and protecting assets.

Another important aspect is that not all gifting will be counted as an " uncompensated transfer" for Medicaid purposes, but any gift must be disclosed to the Department of Children and Families (DCF) at the time of the Medicaid application. If a transfer was made, you would definitely need to consult with an elder law attorney. There are also a number of exemptions and exceptions to the rule that you should consider as well.  One such exemption is that uncompensated transfers, i.e., gifting, does not count between a married couple. This allows for some asset protection planning opportunities in certain situations for married couples, even if one spouse is already in the nursing home. 

In summary, transferring money away (i.e., gifting) in order to protect the elder's funds only make sense in certain situations, such as if the elder wants to create an irrevocable asset protection trust. If you want to learn more about Medicaid and asset protection planning, please do not hesitate to contact our offices or attend one of our monthly Medicaid or Estate Planning seminars. 

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D. Rep DeLoach III
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Estate Planning and Board Certified Elder Law Attorney
4 Comments
Frank, thank you for the question! In your situation, any issues would only be from a Texas Medicaid application and not Florida, so I cannot answer the question. Each state operates their own rules for Medicaid, and if your parents needed long-term care in Texas, then Texas Medicaid law would apply. If they were to apply in Florida, I would not see the transfer of the home to you as much of an issue. The purchase/transfer was certainly not to protect money from the nursing home, but was done for living arrangements. It was not mentioned that a large down payment on the home was made, so unless something like that happened, it should not be a concern.
by Rep DeLoach August 11, 2017 at 11:44 AM
Hello..I have a question. I moved my parents from another state in Jan 2017. We were leasing a home and the owner decided to allow us to buy the home. Due to debt ratio problems , my parents decided to join in on the purchase. The home was purchased by my parents, myself and my wife. After six months my parents decided that florida was not for the, and decided to go back to Texas. They Quit Claimed the home to us with the lenders permission. They are no longer on the Mortgage but are still on the note. They have not made or will not make any of the payments to the lender. In the event that one of my parents needs Medicaid, will this present a problem for them? There is no equity because the loan is only 4 months old. Thanks.
by Frank Roman August 9, 2017 at 02:58 PM
Charles, Thank you for the question! You are basically correct on your math but money can be protected/saved with good legal advice. The concept of the transfer penalty is that assets that were given away should have been used to pay for the applicant's care. In your example, no money is protected because it was, more or less, spent on mom's care in the facility. If you pay back the funds gifted, then no transfer penalty is created or the penalty was negated. If you give the money back, a good elder law attorney (like us) will generally have ways of saving/protecting the gifted funds. It is never too late to get an opinion on how to legally spend/protect the funds over the $2,000 asset limit, even if mom is already in a nursing home. Rep DeLoach
by Rep DeLoach March 20, 2017 at 01:10 PM
based upon this 8346 formula if I were gifted anywhere from 6,000-7,000 dollars I would be liable for 70-80 percent of one months NH stay at the 8346 rate. Paying Mom back lessens that liability although in the end it would be spent down by the NH to get to the 2K asset limit. Right?
by Charles Cohen March 19, 2017 at 12:52 AM
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