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Calculating the Florida Medicaid Transfer Penalty

Woman and her father working to Calculate the Florida Medicaid Transfer PenaltyIn order to qualify for long-term Medicaid in Florida, such as nursing home or assisted living care, 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. The rules would not want you to be able to transfer the assets away in order to get below the applicable limits. Medicaid income and asset qualification levels are listed on our Medicaid planning page.

In the event a long-term Medicaid applicant transferred money away with the five year "look-back" period, the State of Florida will 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 March 1, 2021, the transfer penalty divisor is $9,703/month.  The following is an example of calculating the Medicaid transfer penalty:

Mom makes an uncompensated transfer of $100,000 on January 1, 2019 so that she leaves an inheritance to her children. Mom has a stroke 20 months later. On July 1, 2021, 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, having given most of it away some 20 months earlier.  Her countable assets now do not exceed $2,000 and her income is below the income cap. Because of the gift of $100,000 in the "look back" period, a transfer penalty is calculated as follows: $100,000/$9,703 = 10.31 months (i.e., the amount of the gift divided by the penalty divisor = the penalty period). Thus, because of the 2019 transfer, Mom will not be eligible for Medicaid benefits some 10.31 months from July 1, 2021, the day she was otherwise eligible for Medicaid and has applied for Medicaid in the nursing home.

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 may be important as part of the Medicaid process.  

Further, the federal annual gift tax exclusion, set at $15,000 in 2021, 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 $11.7 million per person in 2021!) 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 $15,000 per year to beneficiaries without creating 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 the applicable gift exclusion ($12,000 per year at the time, $15,000 per year now) to each child based upon bad advice from the family 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. Luckily 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 his remaining assets.

Another Trust Story: I was talking to a daughter who had just received a call from her local area agency on aging that her parents were both coming off of the Medicaid wait list - which is great news!  But Mom and Dad had assets over the bare minimum (a couple is only allowed to have $3,000 in countable assets for Medicaid purposes, if they both need Medicaid). In this situation, the caseworker from the area agency on aging told the daughter that she could just take all of Mom and Dad's money and place it into her own name.  After reading this webpage, you know that money/assets cannot be given away to protect the assets within 5 years of a Medicaid long-term care application!  I was shocked that someone working for the government would tell the daughter to just give the money away, which absolutely should not be done.  Of course, good elder law attorneys know ways of protecting assets within the 5 year lookback period.

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 should 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 Medicaid/asset protection planning opportunities for married couples, even if one spouse is already in the nursing home. 

Are there legal ways to protect assets during the "look back" period?

Yes. While many are worried about gifting and the five year "look back" period, a Medicaid applicant may not need to give money/assets away before they need Medicaid/long-term care. The reason is that there are many legal ways to protect assets when someone is already in the nursing home. For example:

Mom has a home and $50,000 in the bank. If the family is worried about protecting the $50,000 from the high cost of nursing home care, an elder law attorney will be able to present some great options on asset protection, even if mom is already in the nursing home. This means that mom would not have needed to give her money away in order to protect it as an elder law attorney can help protect it now, even if mom is in the nursing home. The family may not want to sell the home as the home is protected for Medicaid purposes. If the family wants to be able to sell the home while mom is in the nursing home, the family could have considered an irrevocable asset protection trust just for the home.

We have more information on Florida Medicaid asset protection options that discusses asset protection within the 5 year look back.

Can Mom (or Dad) sell me the home for $1.00?

No. A transfer of assets (i.e,. a gift) is the disposal of an asset without fair compensation. If you want to protect the assets, any sale of property/transfer must be at fair market value - something a willing buyer would pay a willing seller. You just cannot sell something for less than what it is worth to "protect it" from the nursing home.

Should I give all my assets away five years before I need the nursing home?

An attorney would rarely, if ever, advise giving all of your assets away - for a number of reasons.  Most people do not want to give their assets away but if you had children you trust and you want to try to preserve assets for their inheritance, you may want to consider a Florida irrevocable asset protection trust. Irrevocable trusts used to protect assets are preferable to outright gifting to children for a number of reasons.

Medicaid Spend-Down

You can learn more about the Medicaid Spend-Down on this webpage. Generally speaking, we see Medicaid "spend-down" as legal ways to spend money in order to qualify for Medicaid. It is likely that the Medicaid spend-down is best used when the elder's assets are already very close to the Florida's applicable long-term Medicaid limits. Only a good elder law attorney will be able to decide how to best spend assets or hire an attorney to help you actually protect assets.

What About Supplemental Security Income/SSI?

Medicaid has many different programs - some have transfer penalties (like the long-term care Medicaid) and some do not. If you are receiving Supplemental Security Income, there is a transfer penalty for this program as well, but the penalty/look-back period is only for 3 years and the penalty divisor is the Federal Benefit Rate ($794/m in 2021).  Here is our webpage on Special Needs Trusts in Florida that may help.


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. 

People who have read this may also want to read:

Finally, I have two free books that can help you make the right decisions:

D. Rep DeLoach III
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Estate Planning and Board Certified Elder Law Attorney
Hello! On the $1,200 stimulus payment, you are right that this was not income. One year after the payment is made to the Medicaid recipient's account, it will become an asset that could take him/her off of Medicaid if the account exceeds $2,000. On your question, you know that you cannot give the money away so you will have to think of ways to spend money for the Medicaid recipient - do they need any clothes/phone/TV/things that improve quality of life? Basically, you just need to think of ways to spend money for the recipient's benefit. If you do this, Medicaid will not have any issues with how the money was spent. I hope this helps answer your question!
by Rep DeLoach August 16, 2020 at 10:14 AM
Thank you.Your responses are quite helpful. Another question... Can the stimulus payment money just be withdrawn? I know it doesn't count as income... but what can be done with it?
by shelley August 15, 2020 at 12:21 PM
Shelley, while the best answer is that you should consult your mother's attorney on assets getting over the $2,000 Medicaid limit, you sometimes just need to think creatively - is there anything she needs at all to help her out? Also, and importantly, the caregiver(s) could certainly be reimbursed for anything they pay to help your mother - gas mileage, meals, etc. Also, has her funeral been paid for? None of these things are gifts for Medicaid purposes and things like this could help keep her under the asset limit.
by Rep DeLoach August 9, 2020 at 12:41 PM
My mom is in an assisted living facility with dementia. Her assets have increased as her monthly payments ave decreased due to Hospice.. She is 99.What can I legally spend the stimulus money on that will not raise a flag?
by shelley August 7, 2020 at 05:21 PM
Katie, This is a great question that highlights the differences in Florida Medicaid programs. This particular blog post calculates the penalty for Florida Long-Term Medicaid, such as in the nursing home or in the assisted living facility. There are other penalties for gifting in other "needs-based" programs such as Supplemental Security Income (SSI) that your mother may want to be on. I will reach out to you off this blog to help confirm the government program she wants to be on and how to legally protect her money. Thank you! Rep DeLoach
by Rep DeLoach November 22, 2017 at 09:53 AM
Hi Rep DeLoach, My mom (56) is on a very low disability payments and has $15,000 from payback. I want to take a mortgage and buy her a small condo with mom's money as a downpayment. How we should proceed with $15,000?Can she gift it to me or she needs to be on a deed (but not on mortgage). The plan is she would be paying condo fees and utilities and that would leave her some extra money, for now her rent is higher than her disability payments.
by Katie November 21, 2017 at 01:57 PM
Christina - renting your own property to your mother could be a good way to go. Her paying you market-based rent (i.e., the normal rate you would rent another tenant) would not be a problem for Medicaid purposes. I would not want to provide specific legal advice without a consult, but your general concept seems pretty good here. If you live in the area, you could come to one of my free monthly seminars to learn more. Thank you for your interest!
by Rep DeLoach November 16, 2017 at 03:03 PM
Hi Rep DeLoach, thank you for your confirmation. Another question that I have been contemplating... I have been thinking of purchasing a small condo and having my Mom rent it from me for a fair rent price. Are there any concerns on this idea for Medicaid eligibility in the future? I don't want a good idea to turn into a bad one since we are related and Medicaid may not like her paying me monthly rent?
by Christina November 16, 2017 at 01:40 PM
Christina, Good question! You are correct- if your mother gave you the $5,000 and she needed Medicaid in less than 5 years, you could give the money back to her. At that point, you would then look for other ways to effectively spend the funds for your mother's benefit, which may include pre-paying for her funeral, among other options. It would be helpful to discuss your options with an elder law attorney in this event. Thank you! Rep DeLoach
by Rep DeLoach November 16, 2017 at 01:23 PM
In reading the article, is it correct to understand that if my Mom were to gift me $5000 today and 4 years from now it is causing her a penalty with Medicaid, I could give her back the $5000 at that time if needed and she can then qualify? My Mom wants to give but I am concerned it may be an issue in the future.
by Christina Sanchez November 15, 2017 at 04:53 PM
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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