In the state of Florida, people who apply for long-term Medicaid (nursing home or HCBS benefits) who transfer assets within five years of applying for benefits may be subject to a transfer penalty. This five-year period, also known as a look-back period, is designed to prevent individuals from giving away assets in order to qualify for Medicaid. The transfer penalty is calculated by taking the total value of assets transferred during the five-year look-back period and dividing it by the average monthly cost of nursing home care in the state ($10,438/m in 2024). The resulting number is the number of months that the individual will be ineligible for Medicaid benefits.
For example, if an individual transferred $100,000 worth of assets during the five-year look-back period and the average monthly cost of nursing home care in the state is $10,438, the individual would be ineligible for Medicaid benefits for approximately 9.58 months. This penalty period starts to run when the Medicaid applicant applies for Medicaid and is Medicaid eligible. I discuss the Florida Medicaid transfer penalty at greater length at this blog post.
Exceptions to the Transfer Penalty
However, there are certain exceptions to the Medicaid transfer penalty. Medicaid does not impose a transfer penalty under the following circumstances:
- Transfers to a spouse
- Transfers to a disabled child (disabled as determined by Social Security)
- Transfers to a child under age 21
- Transfers of your home to a child who lived with the Medicaid applicant for 2 years and essentially kept the applicant from moving to a nursing home
- Transfers of home equity to the applicant's sibling who was living with the applicant and who co-owned the home
- Transfers to a trust for the benefit of a disabled child
It is important to note that the transfer penalty applies to all types of assets, including cash, investments and land.
What about Other Gifts?
What if, as an example, Mom, age 80, gave away $20,000 to granddaughter to help pay for a down payment on her home. At age 83, Mom has a stroke, has to be in an nursing home, and runs out of money and needs to apply for Medicaid? This would create a transfer penalty under the rules. But, in this example, it may be possible to argue that a Medicaid transfer penalty should not apply. Medicaid creates a penalty so that people do not give money away to protect it from the nursing home. If it can be argued that Mom did not give this money away to protect it from the nursing home, a transfer penalty may not be imposed. Importantly, an elder law attorney should be consulted in this situation. If you are considering gifting/transferring assets for your elderly Florida relative, it is important to consult with an elder law attorney (like our firm!) who can help you navigate the rules and regulations of the Medicaid program.
Irrevocable Trusts for Medicaid
Many individuals may also consider creating a irrevocable trusts for Medicaid purposes. These types of trusts must be done before the five (5) year look back period. I have more on Irrevocable Medicaid Trusts here.
Are There Legal Ways to Protect Assets?
If your loved one is in a nursing home or may need to be in a nursing home in the future, or needs long-term care Medicaid, there are legal ways to protect assets. Our website has a great deal of information on Florida Medicaid spend-down planning.
Looking to Apply for Medicaid?
Read our free book on Florida Long-Term Care Medicaid to get you going in the right direction!
In conclusion, the Medicaid transfer penalty in Florida is a complex and often confusing aspect of the Medicaid program. It is designed to prevent individuals from giving away assets in order to qualify for benefits, but it also has the potential to cause significant financial hardship for those who are unaware of the rules and regulations. It is important for individuals and their families to understand the Medicaid transfer penalty and its potential impact on their eligibility for benefits, and to consult with an attorney if they are considering transferring assets. By being informed and proactive, individuals can ensure that they are able to access the benefits they need to help them stay financially secure.