Transferring Assets Before Applying for Medicaid: What’s Allowed?
If you’re thinking about applying for Medicaid, especially for long-term care, one of the most common questions we hear is, “Can I transfer assets to qualify?” Understanding what’s allowed and what isn’t is a huge part of preventing expensive, time-consuming, and penalizing mistakes.
Medicaid has strict rules about asset transfers. The goal is to prevent people from giving away property or funds just to meet the eligibility limits, which is a common issue. However, certain transfers are permitted, and planning carefully can help protect your assets the way you’d like while complying with the law.
The Medicaid Look-Back Period
Florida, like most states, enforces a five-year look-back period for asset transfers. This means that when you apply for Medicaid, the state will review all gifts or transfers made within the five years before your application.
Transfers made during the look-back period that are not allowed can result in a penalty period, during which Medicaid will not pay for long-term care.
Transfers made more than five years before applying are not penalized
Transfers That Medicaid Does Allow
Unlike the common misconception, Medicaid does not disallow all asset transfers. Some transfers are considered exempt or permissible under the Medicaid rules:
1. Transfers to a Spouse
You can transfer assets of any kind—such as money or property—to your spouse without affecting your Medicaid eligibility.
2. Transfers to a Disabled Child
You may transfer assets to a child who is under 21, blind, or disabled without any eligibility issues.
3. Transfers to a Trust for a Disabled Loved One
Money or property can be placed in a special needs trust for a disabled person of any kind. Assets in this trust do not count toward Medicaid eligibility whatsoever.
4. Paying for Certain Care or Expenses
Transfers that are direct payments for medical care or for funeral arrangements are allowed without affecting your eligibility.
5. Transfers Between Siblings for a Home
This is an interesting one—transferring a home to a sibling who lives there and has an equity interest may be allowed, but these transfers are closely monitored and regulated.
Transfers That Can Trigger Penalties
Medicaid generally considers the following transfers to be disqualifying if they occur within the look-back period. Keep in mind, this is only 5 years prior that matters. Anything before that time doesn’t get checked by Medicaid.
Cash transfers: Giving money to children, friends, or other relatives without receiving fair compensation can trigger a penalty. For example, gifting $5,000 or $50,000 is treated the same way: the penalty period is calculated based on the total amount given.
Property transfers: Selling a home, car, or other asset for less than market value counts as a transfer. The value of the property is determined at the time of the transfer, and this amount is used to calculate the penalty.
Penalty calculation: Medicaid divides the value of the transferred asset by the average monthly cost of nursing home care in your state. For example:
$60,000 transferred improperly
Average monthly nursing home cost = $6,000
Penalty = 10 months of Medicaid ineligibility
Key point: Even small transfers can have consequences, but the penalty period scales with the value. There is no specific dollar threshold below which transfers are automatically safe. The focus is on whether the transfer was exempt or fair, not on the exact amount.
Answering Commonly Asked Questions About Medicaid
Who qualifies for long-term care Medicaid in Florida?
Eligibility is based on income and assets, as well as Florida residency. Applicants must generally have limited income and total assets below the state’s threshold.
What counts as income for Medicaid in Florida?
Income includes wages, Social Security benefits, pensions, and some retirement account distributions. Certain expenses, like medical costs and some long-term care expenses, can reduce countable income when determining eligibility.
What assets are exempt from Medicaid in Florida?
Exempt assets often include:
Primary residence (if the applicant intends to return home or the spouse lives there)
One vehicle
Personal belongings and household items
Certain burial funds or pre-paid funeral plans
What happens if my spouse is still living at home?
If one spouse goes into a nursing home, Florida law protects some of the couple’s assets for the spouse who stays at home. This means the healthy spouse keeps enough money and property to cover living expenses like housing, food, and bills, while Medicaid helps pay for the other spouse’s care.
Can I qualify for Medicaid if I have a trust?
Certain trusts, like special needs trusts, can protect assets while allowing Medicaid eligibility. Other trusts may be counted as assets, so it’s important to consult a professional estate planning attorney before creating or funding a trust.
What if my Medicaid application is denied?
You have the right to appeal a denial. Florida allows applicants to request a hearing to review the decision. Documentation, proof of expenses, and clarification of asset ownership can improve your chances of approval.
Moving Forward
Knowing which asset transfers are allowed and how trusts can protect your assets gives you a huge advantage in attaining your eligibility. With the right planning, you can safely get Medicaid without sacrificing your earned assets and ensure you or your loved ones get the long-term care needed without any issues. We hope this article was of use to you, and if you have further questions, feel free to contact us today!