Can Your Client Keep the Family Home AND Qualify for Medicaid? Florida Medicaid Rules Every Professional Should Know

What Florida attorneys and allied professionals should know about Medicaid eligibility, the family home, carrying costs, rental income, replacement property, and estate recovery.

For many Florida clients, the family home is their most valuable asset, both financially and emotionally. While a primary residence may be excluded when determining Medicaid eligibility, that does not necessarily mean it is fully protected. Attorneys and other advisors should understand how home ownership can affect long-term planning, including:

• carrying costs
• rental strategies
• replacement property
• estate recovery
• and the client’s broader estate and tax objectives

The Question Is Simple. The Answer Is Not.

One of the first questions Florida families ask when a spouse or parent needs long-term care is whether Medicaid will require the sale of the home. The common shorthand – “Will Medicaid take the house?” – invites an answer that is either too alarming or too reassuring. Florida Medicaid does not ordinarily require an applicant to sell a qualifying principal residence merely to satisfy the asset test. But that statement is only the beginning of the analysis.

For attorneys who do not concentrate in elder law, and for CPAs, financial advisors, bankers, care managers, real estate professionals, and other referral partners, the important point is that Medicaid eligibility, preservation of the residence, payment of carrying costs, property-tax treatment, rental income, and estate recovery are separate questions. They overlap, but they do not have identical rules or identical solutions.

A sound plan therefore asks more than whether the home is “exempt.” It asks who owns it, who lives there, whether the applicant intends to return, how much equity exists, whether a spouse or protected child resides there, how taxes and insurance will be paid, whether rental is practical, how title will pass at death, and whether the proposed strategy fits the client’s broader estate plan.

1. The Home May Be Excluded for Eligibility Purposes

Florida’s Department of Children and Families policy manual provides that a home used as the individual’s principal place of residence is excluded from countable assets. The exclusion may apply regardless of the type or degree of ownership, and only one residence may receive the principal-residence exclusion. A temporary absence does not necessarily destroy the exclusion when a spouse or dependent relative remains in the home, sale would create specified hardship for a co-owner, or the applicant or representative states an intent to return. DCF policy also makes clear that the intent-to-return rule applies to a property that was the individual’s home before the absence.

This is why the family home can remain part of the client’s balance sheet even when the applicant receives institutional or community-based long-term care. Yet there is an important qualification: long-term care applicants are also subject to a home-equity standard, unless an exception applies. The governing limit is indexed and should be verified for the year of application. The presence of a spouse, minor child, or blind or disabled child in the home can materially alter the analysis.

Referral professionals should resist translating these rules into a universal promise. “The home is exempt” may be correct as a preliminary eligibility observation, while still being incomplete as legal advice.

2. Keeping the Home Requires a Carrying-Cost Plan

A non-countable house is not a self-funding house. Property taxes, insurance, mortgage payments, association charges, landscaping, utilities, maintenance, and capital repairs continue after the owner enters a nursing facility or begins receiving home- and community-based services. In South Florida, insurance premiums and storm-related repairs can make this issue especially significant.

An experienced Medicaid planning attorney considers whether sheltered or otherwise available assets can lawfully be positioned to meet those expenses. The solution may differ depending on whether the client is married, whether a community spouse remains at home, whether family members are willing to contribute, and whether the applicant’s income must be paid toward the cost of care. A plan that successfully reaches technical Medicaid eligibility but leaves no realistic source for taxes, insurance, or repairs can ultimately force a distressed sale.

This is also where coordination with the client’s CPA, financial advisor, property manager, and insurance professional can be invaluable. The objective is not simply to preserve title. It is to preserve a workable asset that can be maintained safely and economically.

3. Renting the Property Can Be an Option – but Not a Shortcut

Some families conclude that an empty home should be rented. That may be a sensible strategy, but it changes the factual and legal landscape. DCF policy recognizes that income-producing real property, including rental and vacation homes, may be excluded when it produces income consistent with fair market value. Property that does not generate a reasonable return may be counted in full, subject to limited rules for temporary adverse circumstances. The rent itself also must be analyzed under Medicaid income and patient-responsibility rules.

The rental decision may affect matters outside Medicaid. Florida’s Department of Revenue cautions that renting a homestead can cause the loss of the property-tax homestead exemption, subject to a narrow short-term-rental rule. Loss of the exemption can increase ad valorem taxes and may affect the Save Our Homes assessment limitation. Landlord-tenant obligations, insurance coverage, management expenses, depreciation, income-tax reporting, and the condition of the property must also be evaluated.

Accordingly, the correct question is not merely, “Can the house be rented?” It is whether the particular property can be rented at a defensible market rate, produce a reasonable net return, remain properly insured and managed, and still advance the client’s Medicaid, tax, and estate-planning objectives.

4. Sometimes the Existing House Is the Wrong Asset

The emotional importance of the family residence can obscure a practical reality: the existing home may not be the best property to retain. It may be:

• expensive to insure
• difficult to maintain
• located in a condominium with rental restrictions
• poorly suited to generating income

In some cases, selling the residence and acquiring a more manageable replacement home or a property better suited for rental may deserve consideration.

Florida DCF policy provides a limited exclusion for proceeds from the sale of an excluded home while a replacement home is being acquired. The policy manual imposes a short and strictly administered replacement period, and proceeds not timely reinvested can become countable. The timing of closing, receipt of proceeds, title to the replacement property, transaction expenses, and any remaining cash therefore require advance coordination.

A replacement-property strategy also implicates:

• capital-gain rules
• the residence-sale exclusion
• property-tax portability
• financing
• closing costs
• the Medicaid treatment of any net proceeds.

What looks like an ordinary real estate transaction may become a disqualifying event when sequenced incorrectly.

5. Eligibility Protection and Estate Recovery Are Different

Even when a home is excluded during life, professionals must consider what happens at death. Florida’s Medicaid Estate Recovery Act authorizes the Agency for Health Care Administration to file a claim in the probate estate of a deceased Medicaid recipient for covered assistance paid after age 55.

The statute postpones or prohibits enforcement in certain circumstances, including when the recipient is survived by a spouse, a child under age 21, or a blind or permanently and totally disabled child. It also states that no recovery debt may be enforced against property exempt from creditor claims under Florida law.

Florida’s constitutional homestead protection can therefore be central. Article X, section 4 protects qualifying homestead from forced sale by most creditors and provides that the protection inures to the surviving spouse or heirs. Whether property qualifies as protected constitutional homestead at death is a distinct legal inquiry involving:

• ownership
• residence
• family status
• acreage
• devise restrictions
• the identity of the beneficiaries

A house that has become investment property, lost its homestead character, or passes through probate to a beneficiary who does not receive the constitutional protection may present a different recovery profile. Conversely, property passing as protected homestead may be beyond the reach of the Medicaid estate-recovery claim under Florida law. The analysis cannot safely be reduced to the phrase “Medicaid cannot take homestead.”

6. Enhanced Life Estate Deeds May Be Useful

In an appropriate case, an enhanced life estate deed – commonly called a Lady Bird deed – may allow the owner to retain broad lifetime control while designating remainder beneficiaries who receive title outside probate at death. Avoiding probate can be relevant because Florida’s estate-recovery statute operates through a claim against the probate estate. The deed may also preserve important income-tax basis consequences that differ from an outright lifetime gift.

But a Lady Bird deed is not a standard form to be downloaded and signed without analysis. Counsel must consider:

• the exact deed language
• marital rights
• constitutional homestead restrictions
• title insurance
• existing mortgages
• creditor issues
• federal tax liens
• capacity
• undue influence
• beneficiary choices
• the consequences of later sale or refinancing

A deed that is technically valid may still be inconsistent with the client’s trust plan, family circumstances, or long-term care strategy.

The objective is not to use a particular instrument in every case. It is to choose the form of ownership and succession that best coordinates Medicaid eligibility, estate recovery, probate avoidance, tax treatment, and the client’s dispositive wishes.

7. Why These Strategies Should Not Be Self-Implemented

The concepts described in this article are understandable at a high level, which creates a risk of false confidence. The implementation is frequently fraught with errors and omissions. A well-intentioned family may transfer title and trigger:

• a Medicaid penalty
• rent property below market and lose an exclusion
• sell too early and create excess countable resources
• allow insurance to lapse
• lose valuable property-tax benefits
• select the wrong remainder beneficiaries
• create a deed that conflicts with a spouse’s or minor child’s homestead rights

Medicaid planning is an interdisciplinary legal process. It requires current knowledge of DCF policy, federal transfer rules, Florida homestead law, probate and trust law, taxation, real estate, and the applicant’s care setting. It also requires documentation that is consistent with what is reported on the Medicaid application. The fact that one strategy worked for a neighbor or relative does not establish that it will work for the next family.

For these reasons, a Florida Bar board-certified elder law attorney or another attorney with substantial, concentrated experience in Florida Medicaid planning should facilitate the analysis and implementation. Early involvement is particularly important before a deed is signed, a lease is executed, a residence is listed for sale, or sale proceeds are deposited into the applicant’s account.

A Practical Referral Checklist

• Has the client or family discussed selling, gifting, leasing, or changing title to the residence?
• Is a spouse, dependent relative, minor child, or blind or disabled child living in the home?
• Are property taxes, insurance, mortgage payments, association charges, and repairs sustainable?
• Is the home likely to remain constitutional homestead at the owner’s death?
• Would rental produce a supportable market return, and has the property-tax impact been reviewed?
• Could a replacement property better serve the client’s housing, income, or estate-planning objectives?
• Has an elder law attorney reviewed the transaction before funds or title change hands?

The Professional Takeaway

A Florida client may often qualify for Medicaid long-term care benefits while retaining the family home. But “keeping the family home” is not a single legal outcome. It may mean maintaining:

• an excluded residence for a spouse
• preserving resources for carrying costs
• converting the property to a properly documented income-producing asset, replacing it with a more suitable property
• coordinating title so the home passes consistently with Florida homestead and estate-recovery law.

The greatest value of early legal planning is not a secret technique. It is the disciplined coordination of eligibility, income, real estate, tax, probate, and family considerations before an irreversible step is taken.

When a Client’s Home Is Part of the Plan

Before a client deeds, rents, sells, or replaces a residence in anticipation of long-term care, consider involving experienced Florida Medicaid counsel. A collaborative review before any transaction can help preserve planning opportunities, avoid unintended consequences, and support better outcomes for both you and your client.

The attorneys at Shalloway & Shalloway regularly work with attorneys, financial advisors, CPAs, care managers, and other allied professionals to help clients navigate complex Medicaid planning issues. If your client is making decisions about the family home in anticipation of long-term care, we’re happy to work with you to develop a coordinated strategy.