Lady Bird Deeds provide important Medicaid planning opportunities for Florida homeowners that may need nursing home or other long-term care. Unlike Florida quitclaim deed forms or warranty deed forms, Lady Bird Deeds do not disqualify you from receiving Medicaid benefits you would otherwise receive. And when you die, the state cannot file a claim against the property for reimbursement of Medicaid benefits. This article discusses the Medicaid planning opportunities.
Overview of Florida Lady Bird Deeds
Lady Bird Deed forms (also known as enhanced life estate deeds) are popular in Florida. They are most often used to avoid probate of Florida real estate. A Lady Bird Deed allows property owners to create a transfer of real estate that does not become effective until their death. The property owner retains all rights to the property during his or her lifetime, including the right to sell the property or change the person who will receive the property at his or her death. When the property owner dies, the property passes automatically to the transferee(s) listed on the deed.
Eligibility for Florida Medicaid: Countable Assets
Medicaid is a joint state-federal program that provides financial assistance to individuals that need nursing home or long-term care. Medicaid is only available to individuals that meet certain eligibility requirements.
Medicaid eligibility requirements are intended to ensure that only financially needy individuals receive Medicaid benefits. If you do not meet the Medicaid guidelines, you must spend your own resources before Medicaid will cover your nursing home care. This means that assets that would otherwise pass to your children or other loved ones will instead be used to pay for your care.
Florida’s Medicaid program is called the Institutional Care Program. To apply for Medicaid in Florida, you must provide the Department of Children and Families with a detailed description of all of your assets. Any countable asset is treated as a financial resource that you must contribute to your own care before Medicaid will pay for your care. The Department of Children and Families will expect you to use these assets to pay for your own care, even if it requires you to sell them and spend the proceeds on your own care. This requirement is implemented by creating a period of ineligibility for Medicaid. The length of this period is calculated based on the value of countable assets that you own.
Thankfully, though, not all assets are countable assets. If an asset is not countable, the Department of Children and Families will not consider it for purposes of determining whether you qualify for Medicaid. In the real estate context, the home that you use as your primary residence is not a countable asset if your equity in the home is less than or equal to $552,000 (2016 amount) and you intend to return home. And if your spouse or a minor, blind, or disabled child lives in the home, the home is not a countable asset regardless of how much equity you have in the home.
Eligibility for Florida Medicaid: The 60-Month Lookback Period
Prior transfers of property can also affect Medicaid eligibility. Under Florida’s Medicaid Rules, you must disclose any assets that you transferred within a 60-month lookback period. This 60-month lookback period is intended to prevent people from giving assets away to qualify for Medicaid. Any transfers made during the 60-month lookback period are added back into your countable assets to determine whether you qualify for Medicaid.
To illustrate, assume that you make a gift of your home to your children 4 years before you apply for Medicaid. When the Department of Children and Families evaluates your application for Medicaid, it will treat you as though you still own the equivalent value of the home. This means that the value of the home that you transferred 4 years ago is considered a countable asset that could postpone your eligibility for Medicaid.
Florida Lady Bird Deeds and Medicaid Eligibility
The 60-month lookback period creates traps for the unwary. A person who innocently gifts their home to their children for personal reasons may be surprised to find out that, several years later, they are not eligible for governmental benefits that they would otherwise receive.
Lady Bird Deeds help avoid this trap. Unlike some other deed forms, a Lady Bird Deed does not become effective until your death. When you transfer property by Lady Bird Deed, the Department of Children and Families does not consider the property to have been “transferred” for purposes of the 60-month lookback period, even though you have signed and recorded the deed. This means that Lady Bird Deeds do not disqualify you from receiving Medicaid benefits you would otherwise receive. This is clearly stated in Section 1640.0613.01 of the Florida ESS Policy Manual, which governs Florida’s Medicaid program:
If an individual retains life estate using a lady bird deed or life estate with powers, no transfer has occurred. The individual retains full ownership powers in the property and it is only upon their death that the property transfers ownership to the remainderman.
Because you retain the rights to your property during your lifetime, the deed is simply disregarded for Medicaid purposes. This means that a transfer by Lady Bird Deed will not negatively affect your Medicaid eligibility.
Florida Lady Bird Deeds and Medicaid Estate Recovery
Lady Bird Deeds have another important benefit: protection from Medicaid recovery. Most states—including Florida—have a program in place that allows the government to seek reimbursement from your assets after your death. If, for example, Medicaid paid $40,000 in benefits during your lifetime, the Department of Children and Families may file a claim against your assets after your death for $40,000 to reimburse Medicaid for the benefits paid. This claim reduces the assets that would otherwise pass to your children or other loved ones.
In Florida, Medicaid recovery is limited to the assets included in the probate estate. When property is transferred using a Lady Bird Deed, the property passes automatically at your death. This means that property transferred using a Lady Bird Deed is not included in your probate estate and, as a result, is not subject to Medicaid recovery at your death.