Estate Planning and Medicaid Eligibility in Orlando: Protecting Assets

Why Is Medicaid Eligibility an Important Factor in Estate Planning?

A person turning 65 has almost a 70% chance of needing long-term care services in the future, as stated by the U.S. government on LongTermCare.gov. Of the U.S. adults who are 65 today, 20% will need long-term care for more than five years. According to the Washington Post, the average annual costs of elder care options in Florida are:

• Private room in a nursing home: $116,000
• Assisted living facility: $48,000
• Adult daycare (five days a week): $18,000
• Home health aide (44 hours a week): $57,000

Estate planning for Medicaid eligibility can help protect assets from being depleted by long-term care expenses. Asset protection strategies can help safeguard assets for beneficiaries while aligning with Medicaid rules in Florida.

What Is Required for Medicaid Eligibility?

Medicaid is a joint federal and state program that provides health coverage to millions of Americans. Medicaid long-term care programs for which older adults may be eligible include Nursing Home Medicaid, Home and Community Based Services, and Medicaid for Aged and Disabled. To be eligible for Medicaid long-term care, seniors in Florida must have limited income, limited assets, and a medical need. In 2024, a Nursing Home Medicaid applicant must meet the following eligibility criteria, as stated by the American Council on Aging:

• Income less than $2,829 per month;
• Assets less than $2,000; and
• Medical condition for which a nursing home level of care is required.

What Types of Assets Count Toward Medicaid Limits?

Assets that are countable toward the Medicaid income limit include cash, bank accounts, stocks, bonds, investments, and real estate in which the applicant is not residing. Many assets may be exempt for Medicaid purposes, including a primary home, an automobile, household furnishings, and personal belongings. IRAs in payout status – the required minimum distribution is being withdrawn — are also exempt in Florida.

For a married couple, assets are considered jointly owned, whether one or both spouses are applying for Medicaid. However, if only one spouse is applying, the non-applicant spouse is permitted to retain a Community Spouse Resource Allowance (CSRA) of up to $154,140 of the marital assets in 2024.

What Is the Medicaid Look-Back Rule?

Florida has a Medicaid Look-Back Period, extending back to five years before the date of a Medicaid application. This is intended to deter applicants from gifting assets to meet Medicaid limits. All assets transferred during that period are reviewed. If the Look-Back Rule has been violated, a penalty period of ineligibility is imposed.

What Estate Planning Strategies Can Help Overcome Medicaid Income and Asset Limits?

One popular Medicaid estate planning tool is the qualified income trust (QIT). Also known as a Miller trust, a QIT is set up expressly to avoid exceeding Medicaid income limits. In 2024, if your monthly income is $2,829 or more, the amount of income that exceeds the Medicaid eligibility limit or more can be placed in the QIT each month. The trustee can use trust funds to pay for any medical bills not covered by Medicaid.

What Asset Protection Strategies May Be Available?

Asset protection techniques and strategies may be implemented to safeguard estate assets while preserving Medicaid eligibility. Depending on the circumstances, estate planning asset preservation tools may include:

• Medicaid-compliant annuities: Annuities must be non-assignable, irrevocable, paid in equal installments, shorter than your life expectancy, used for the healthy spouse’s future care, and contracted to the Florida Medicaid agency as the primary beneficiary upon the death of the Medicaid recipient.
• Other irrevocable trusts: Assets transferred into an irrevocable trust are protected from being counted for Medicaid eligibility. This can help preserve an inheritance for your beneficiaries. The trust must be set up at least five years before your Medicaid application, or it will be subject to the Look-Back Rule.
• Promissory notes: Classifying asset transfers as loans may allow older adults to lend assets to their children and still maintain Medicaid eligibility. A promissory note, which is simply a written promise to repay a particular amount, may be given in return for a loan. However, to not interfere with Medicaid eligibility, the loan must meet certain qualifications: 1) The term of the loan cannot be longer than the life expectancy of the lender. 2) Payments must be made in equal amounts throughout the term of the loan. 3) The debt cannot be canceled upon the death of the lender.
• Spousal refusal: This practice occurs only in three states – Ohio, New York, and Florida. The spouse who is not applying for Medicaid refuses to cover the costs of long-term care for the other spouse who is applying. Under federal law, if the non-applicant spouse refuses to pay for the other spouse’s care, their assets cannot be considered in determining the other spouse’s eligibility. Assets over the eligibility limit may be transferred to the non-applicant spouse without violating Medicaid’s Look-Back Rule.

Consult with an Experienced Orlando Estate Planning Lawyer

Medicaid estate planning can be a complicated and surprisingly tricky process. Our experienced estate planning attorney at The Law Office of Erin Morse can recommend the best asset preservation strategies and help you develop an estate plan that protects both your assets and your long-term medical care. Contact us today at (407) 743-6059.