As an elder law attorney who focuses on Medicaid planning, most of my clients are interested in saving their home. I discuss ways to avoid doing this in another article I wrote called: how to save my home or property from Medicaid? The article discusses the circumstances in which one’s house can remain or become an exempt asset (i.e. not counted by Medicaid for eligibility purposes).
But, keeping one's home or other real property is not always the goal. Your Medicaid attorney, first and foremost, should not be providing cookie-cutter Medicaid qualification strategies. Your elder care lawyer should provide you with options that are tailored to your unique situation and goals. So this article discusses what can be done when the client is seeking Medicaid long term care (ICP) benefits and wants to sell their home.
What if I want to sell the home and obtain Medicaid?
The initial concern is that, with Medicaid only allowing $2000 worth of assets, selling any home will almost certainly bring the owner above the allowed-asset amount and, at first glance, seem to disqualify the homeowner from Medicaid.
But if you dig into the Department of Children and Families ESS Medicaid policy handbook (which I call the Medicaid manual), you will find Sections 1640.0537, 1640.0543.03 and 1640.0307.01, which are helpful.
1640.0537. Good Faith Effort to Sell.
This section of the medicaid manual states that property may be temporarily excluded if the individual is making good faith efforts to sell at fair market value. So just by attempting to sell any property (homestead or second homes or income producing property), that property is deemed not-countable for Medicaid-eligibility purposes. But the Medicaid application examiner wont just take your word for it, they will ask for proof. You can verify that you are attempting to sell the real estate by providing your listing agreement with a real-estate broker, MLS listing, newspaper listing, etc...
You also must be reasonable. If your property is worth $200,000 and you are "attempting to sell" it for $800,000, that would not pass the good-faith effort test.
Once the real estate is sold, you should have already developed a plan with your elder law attorney regarding what you are going to do with the proceeds (i.e. how will the money be sheltered in a medicaid-compliant manner). If the home sale proceeds simply sit in your bank account, this will almost certainly result in you becoming "over-resourced" and kick you out of the Medicaid ICP program.
1640.0543.03. Home Replacement Exclusion.
Sometimes the goal isn't to just sell the house - its to upsize or downsize. Most want to downsize (lower property taxes, utilities bills, maintenance and upkeep, etc...) especially when one spouse will remain in the community (at home) while the other enters a nursing home. But upsizing can be a great medicaid spend down strategy. For example, lets suppose a medicaid applicant owned a home worth $300,000 and had an extra $100,000 in stocks and cash. The medicaid applicant could put 100K worth of improvements into their home, or sell the 300K home and purchase a 400K home with the extra assets. The higher-value home would then still be excluded as an exempt asset, protected from creditors, and able to avoid Medicaid estate recovery. For married couples, if the healthy spouse does not expect to require long-term care in the near term, this strategy provides a way to shelter a nearly unlimited amount of money. Certainly, your attorney should develop a contingency plan should the well-spouse suddenly become sick or injured and require long-term care.
1640.0543.03 instructs that proceeds from sale of house can be excluded from assets for up to three months while the home is being replaced. If the individual applies for Medicaid after selling a home that would have been excluded as an asset, the three month exclusion period begins the day the individual applies for benefits.
Since 1640.0307.01 states that a home is excluded if it is the individual's principal place of residence, the replacement home will be an excluded home if it can be shown to be their principal place of residence. Florida case law and attorney general opinions indicate that physical presence is not necessary for the home to be considered the principal place of residence for homestead tax exemption purposes.
Medicaid Lawyer Resources
- Summary of Section 1640 (Assets) in Florida Medicaid Manual
- Full Text of Section 1640 in Florida Medicaid ESS Policy Manual