Real Estate Challenges with Medicaid Planning

When an individual applies for Medicaid coverage for skilled nursing home care or home healthcare aides, real estate holdings may pose a barrier to the individual’s financial eligibility. In Florida, a homestead property is an exempt, non-countable asset if the equity in the homestead property is $560,000 or less. Any equity over $560,000 is a countable asset for Medicaid purposes. If a Medicaid applicant has homestead equity exceeding the $560,000 threshold, one potential method of curing that issue is to use a personal service contract whereby the Medicaid applicant hires a trustworthy family member to be a care advocate. The Medicaid applicant may then transfer a fractional interest in the homestead property to the care advocate as compensation for the services they will perform under the contract. However, there are limits on the amount of compensation that may be provided under a personal services contract depending on the life expectancy of the Medicaid applicant.

Non-homestead real estate poses a larger financial barrier for Medicaid given that the full asset value is countable for Medicaid purposes. However, if the non-homestead real estate is used as an income rental property, then Medicaid exempts the asset value of the property and only counts the net rental income as additional monthly income to the Medicaid applicant. Net rental income equals the gross rent received minus the expenses of maintaining the property (e.g. mortgage payments, property taxes, home repairs, etc.).

There are additional methods of converting countable non-homestead real estate into an exempt asset. For example, if the Medicaid applicant co-owns the real estate with someone other than a spouse, the co-owner may sign a document memorializing how he/she refuses to sell the real estate property. In such cases, Medicaid will exempt the asset value of such a co-owned property. For additional guidance on how to manage real estate holdings in order to qualify for Medicaid, you should consult with Elder Law attorney.