Understanding Medicaid Asset Limits and Lady Bird Deeds in Florida

Navigating Medicaid eligibility can be complex, especially when it comes to understanding how assets like savings accounts and property impact qualification. A common question is whether a savings account, such as one with $188,000, disqualifies someone from Medicaid, and whether tools like a Lady Bird deed can protect those assets. This blog post breaks down the key points to help you understand Medicaid rules in Florida, focusing on asset limits, income thresholds, and the role of a Lady Bird deed.

What Is a Lady Bird Deed and Does It Protect a Bank Account?

A Lady Bird deed, also known as an enhanced life estate deed, is a smart estate planning tool in Florida. It allows a homeowner to retain control of their property during their lifetime while designating beneficiaries who will inherit the property directly upon their death, bypassing probate. This avoids the time, stress, and costs associated with probate court.

However, a Lady Bird deed does not protect a bank account or other liquid assets for Medicaid qualification purposes. The deed only applies to the homestead property, ensuring it passes directly to the named beneficiaries or trust without Medicaid placing a claim on it. In Florida, Medicaid cannot claim a homestead property transferred via a Lady Bird deed, which is a significant benefit for preserving the home for heirs.

Medicaid Income and Asset Limits in Florida

To qualify for Medicaid in Florida, both income and assets are evaluated separately. Here’s a breakdown:

Income Limits

If an individual’s gross monthly income is under $2,991, it will not disqualify them from Medicaid. For example, an income of less than $2,000 per month, as mentioned in the scenario, is well within the allowable limit for Medicaid eligibility.

Asset Limits

Assets, such as money in a savings account, are treated differently. Medicaid allows an individual to have up to $2,000 in countable assets, with an additional $160 allowance, bringing the total to $2,160. Any amount above this threshold, such as a $188,000 savings account, will disqualify an individual from Medicaid unless the excess assets are spent down or strategically managed.

Countable assets include:

• Money in savings or brokerage accounts

• Stocks or other liquid investments

• Any funds that can be easily accessed

The homestead property, protected by a Lady Bird deed, is not considered a countable asset, but cash in a bank account is.

What Not to Do: Avoid Gifting Assets

One critical mistake to avoid is gifting money to family members or others in an attempt to reduce assets for Medicaid eligibility. If someone gifts a significant sum, such as $188,000, within five years of applying for Medicaid, they will face a penalty period during which they cannot qualify for benefits. This is known as the Medicaid look-back period. Instead of gifting, the money must be spent down or managed in ways that comply with Medicaid rules.

Strategies to Reduce Countable Assets

To qualify for Medicaid while preserving assets, several strategies can be employed in Florida:

1. Spend Down on Allowable Expenses

You can use excess funds to cover expenses that Medicaid permits, such as:

• Burial Policy: Purchasing a burial policy can reduce countable assets. However, be cautious of policies with a cash surrender value, as this value is considered an asset and could push you over the $2,000 limit.

• Facility-Related Costs: Expenses like moving costs, security deposits, or items not covered by Medicaid (e.g., personal care items) can be paid for to reduce the bank account balance.

The goal is to show Medicaid that, for at least one day in the month, the bank account balance was at or below $2,160.

2. Personal Services Contract

A personal services contract is a powerful option for transferring assets to a family member, such as a child, without triggering Medicaid penalties. This contract allows a lump-sum payment to a child in exchange for caregiver services, such as:

• Driving to appointments (e.g., doctor, nail, or hair appointments)

• Running errands (e.g., picking up dry cleaning or delivering supplies)

• Helping with financial tasks (e.g., balancing a checkbook or paying bills)

• Providing household assistance (e.g., cleaning or laundry)

The contract must be:

• Drafted by a qualified elder law attorney

• Based on the parent’s life expectancy

• Signed by the parent or an agent under a power of attorney (if authorized)

Once signed, the funds (e.g., $188,000) can be transferred to the child as compensation for caregiving. However, this payment is considered taxable income for the recipient, so taxes must be reported and paid. Despite the tax implications, this strategy is often preferable to spending down the entire sum on nursing home care.

3. Pooled Trust

If no trusted family member is available to act as a caregiver, a pooled trust is another option. In this scenario:

• Funds are transferred to a trust managed by a nonprofit organization.

• The money can be used for the individual’s benefit during their lifetime (e.g., for supplemental needs not covered by Medicaid).

• Upon the individual’s death, any remaining funds typically go to Medicaid to reimburse care costs, unless transferred to a spouse who is also on Medicaid.

Unlike a personal services contract, where the funds become the caregiver’s property, a pooled trust restricts the use of funds to the individual’s benefit during their lifetime, with Medicaid reclaiming any leftovers.

Why Work with an Elder Law Attorney?

Navigating Medicaid planning requires precision to avoid costly mistakes. A qualified elder law attorney can:

• Draft a personal services contract that complies with Medicaid rules

• Advise on allowable spend-down strategies

• Set up a pooled trust if needed

• Ensure all documents, such as a power of attorney, are properly executed

In Florida, firms like atCause Law Office specialize in elder law and estate planning, offering guidance to protect assets while ensuring Medicaid eligibility.

Key Takeaways

• A Lady Bird deed protects your homestead from probate and Medicaid claims but does not shield bank accounts or other liquid assets.

• Medicaid allows up to $2,991 in gross monthly income and $2,160 in countable assets for eligibility.

• Gifting assets within five years of applying for Medicaid will result in penalties.

• Strategies like spending down, personal services contracts, or pooled trusts can help reduce assets to meet Medicaid requirements.

• Always consult an elder law attorney to ensure compliance with Medicaid rules and to maximize asset protection.

For more information or personalized guidance on Medicaid and Estate planning in Florida, reach out to a trusted elder law attorney to discuss your specific situation.