Realtors and real estate agents, by their very nature, are some of the most service-oriented people out there. I’ve also found that they are great connectors (you don’t just sell/buy the house but use your knowledge of the community to help connect new homeowners with a variety of ancillary service providers and resources).
Real estate agents may not know that elder care lawyers often have to advise their clients on what to do with their homestead and second home as it relates to elder law matters.
But first, let me give you a quick overview of what it is that elder law attorneys do and then I’ll get into how real estate protection and real estate investments are related to what we do.
First, all elder law attorneys will be able to assist with estate planning and incapacity planning. Real estate and estate planning are, of course, interlinked. I always say, that of all the fancy trusts that I am able to provide to my clients, the most important document, by far, is a good durable power of attorney. This is important to realtors because if your client ever loses cognitive capacity, without a well-drafted Florida durable power of attorney, they will not be able to buy or sell real estate.
Second, elder law attorneys, such as myself, focus on medicaid planning. This is where we protect our client’s assets and give them the ability to access government resources to help pay for home-health care, ALF care and, ultimately, nursing home care.
Sometimes their assets can be quite substantial. For example, many of my medicaid-planning clients own their primary residence (homestead) and, on top of that, might have between $25,000.00 and $750,000.00 of funds between checking, savings, CDs, annuities, brokerage accounts, retirement accounts, etc…
USUALLY, older Floridians in need of long-term care (home health aide, ALF or nursing home), spend down nearly all of their money in order to naturally qualify for Medicaid’s valuable long-term care benefits (many don’t realize that Medicare does not have as good of a long-term care benefit when compared to medicaid). An elder care lawyer, who specializes in Medicaid planning, can prevent this from happening. We have a variety of trusts and strategies we deploy, several of which involve real estate.
Florida Real Estate and Medicaid Planning
An important aspect of Medicaid in Florida is that the primary residence / homestead is not counted, (if there is less than $595,000.00 of equity in the home, as of 2020, this equity limit number changes periodically, also if the medicaid applicant's spouse or minor/disable child is also living in the house then there is no equity limit) as a resource when Medicaid calculates when someone is or is not eligible for benefits. In other words, if the total value of the house is $600,000, but they have a $50,000 mortgage, the equity would be calculated as 550K and the entire house would not be counted as an asset. Obviously, if the fair market value of the house is already less than $595,000.00 then we don’t have to consider whether there is or is not a mortgage.
So, if an elderly or disabled client comes to me, in need of long-term care services, and they currently rent or are moving from out-of-state to Florida, with an extra $250,000.00, one of my first suggestions will be: “buy a house or condo.”
What if the client already owns a homestead?
Oftentimes, a client in need of additional home health care, ALF care or skilled nursing care, will already own a homestead but STILL have extra money that is preventing them from being eligible for Medicaid’s long-term care benefits.
If they have substantial assets, we may recommend that they purchase ADDITIONAL real estate that is not their homestead. This is because there is another exception in Federal Medicaid law that requires medicaid exclude as a countable resource, income producing property.
So, let's assume that our client already owns a Florida homestead worth $500,000.00 (which, as we’ve learned, is already an excluded asset for Medicaid eligibility purposes) and the same client has an extra $250,000.00 between their savings, checking and their brokerage accounts.
While we have lots of options, one asset-protection option is to purchase a rental unit (that they indeed have to rent out for fair-market value). Our client then benefits twice. First, they benefit from the additional income they now get to enjoy from the rental property. Second, the value of the asset becomes a non-countable resource (i.e. the value of the property won't count against them when determining Medicaid long-term care eligibility). We can even structure the real estate deal so that it doesn’t have to be paid back to Medicaid after the client passes away, by utilizing lady-bird deed language when the real estate is purchased.
What if someone on Medicaid wants to sell their house?
For my Medicaid clients who require Assisted Living Facility or Skilled Nursing Facility care, they don't want to be responsible for the ongoing upkeep, maintenance, insurance, and other expenses that come with home-ownership. However, if they sell their home, they will likely a sufficient amount to make them ineligible for Medicaid benefits (because they may then have substantially more than $2,000.00).
Luckily, we deal with this situation all the time and have great strategies that will allow our elder law clients to maintain their benefits (as long as the medicaid-planning strategies are in place prior to the closing.
The real estate agent and Florida elder law attorney team
Most older Floridians don’t know that real estate can be used as an asset-protection strategy to get them valuable long-term care services sooner (without having to go broke first). Other Floridians think that they will be forced to sell their real estate to afford the costs associated with long-term care (they don’t have to).
Some people, especially when they move into an ALF or nursing home will want to keep their house to pass onto their heirs (we can help make sure this happens). Other times, of course, they will not want to maintain the upkeep, taxes, CAM expenses, maintenance and other expenses related to condo or home ownership, in that case, its also important they they speak with an elder care attorney to discuss how to protect the resulting sale proceeds (to allow them to obtain or maintain Medicaid long-term care assistance).
I hope this article has explained why real estate professionals and elder law attorneys need to be in close communication with each other for the well-being of their mutual clients.