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Medicaid Estate Recovery in Florida: Everything You Need to Know

Medicaid Estate Recovery in Florida: Everything You Need to Know
Estate Planning and Probate
Jason Neufeld
June 24, 2024

When it comes to long-term care planning, one of the most misunderstood and potentially costly aspects is Medicaid estate recovery. Like many families in Florida, you've worked hard to build up your assets and leave a legacy for your loved ones. However, the Medicaid estate recovery process could put those hard-earned assets at risk if you're not properly prepared.

Because of this, there are plenty of clients who come to us understandably apprehensive about starting the Medicaid planning process because they say, "Doesn't Medicaid have the right to come after your stuff or to collect what they've paid after a Medicaid recipient passes away?"

While this is true, but a good elder law or Medicaid planning attorney in Florida can drastically minimize and often eliminate entirely what would ever have to get paid back to Medicaid. The reason is that Florida, while it certainly has some drawbacks, has a lot of very valuable Medicaid planning tools that are not available in other states and has a fairly standard Medicaid recovery process.

What is Medicaid Estate Recovery?

Medicaid Estate Recovery allows the state of Florida to recover the costs of certain Medicaid benefits from the estate of a deceased recipient. This typically applies to nursing home care, home and community-based services, and related hospital and prescription drug costs.

Under Florida law (Section 409.9101, Florida Statutes), the state may file a claim against the estate of a Medicaid recipient who was 55 years or older when they received benefits. This claim seeks reimbursement for the total amount of medical assistance paid on behalf of the recipient.

When Does Medicaid Come After Your Assets?

There are really only two scenarios where Medicaid estate recovery would ever come into play: if there is probate or if your Medicaid planning strategies were inefficient (as an aside, Medicaid can also come after a personal injury settlement, but that is a lien that is negotiated and handled by your injury claim law firm before funds a disbursed to the injured plaintiff). Otherwise, the only time Medicaid can have their hand out as a creditor is as part of a probate or as part of a special needs trust provision.

During Probate

Probate is the court process that takes place after someone passes away to distribute the deceased’s assets to the next generation. If an estate goes to probate, every judge in the State of Florida will require anyone over 55 to put Medicaid on notice, even if they don't know whether you're on Medicaid or not. This allows Medicaid to submit claims. Obviously, if you were never on Medicaid, there would be no claim, but if you were on Medicaid, they'd have the opportunity to submit a claim.

Part of our work as your Medicaid and estate planners is helping you avoid probate. Even if you don't have creditors, probate takes up a lot of time, requires paying a lawyer more money, and is just a pain. If we can avoid probate, that will always be better in nearly every situation.

If you're on Medicaid, avoiding probate is even more important because that's one of the primary times that Medicaid has an opportunity to have their hand out and say, "Hey, we paid hundreds of thousands of dollars toward care. We want that money first." If given that opportunity, they will get paid first before family or anybody else, just like if you don't pay Visa or any other creditor.

Exceptions in Probate Cases

Some assets, even if they go through probate, are not subject to creditors, such as the homestead. If your home was still your homestead when you passed away (even if you were on Medicaid) and that's the only asset that goes through the probate process while they submit a claim, it will not be successfully reimbursed to Medicaid because the homestead is so sacred in the state of Florida.

That's unlike other states, which don't have as strong protections on the primary residence. But again, why even go through that? Why even give them an opportunity? Let's just avoid probate entirely.

With real estate, we usually discuss a ladybird deed or using a revocable living trust. With all other accounts like IRAs, bank accounts, and anything else the family might have, we want to ensure those assets are structured properly to avoid probate. If there's no probate, Medicaid cannot submit a claim and ask for money back.

Ineffective Medicaid Planning Strategies

There are a couple of other opportunities for Medicaid in Florida to get some money back, depending on what Medicaid planning strategies you use.

Medicaid-Complaint Annuities

Medicaid-compliant annuities rarely make sense in Florida due to the many other planning opportunities available. But every once in a while, they will make sense. However, a feature of Medicaid-compliant annuities is that they increase the Medicaid recipient's income. But, if a spouse does not survive them, the remaining payments typically have to be returned to the state first. That's just a feature that's why Medicaid allows them, and that's why they're Medicaid compliant.

Pooled Special Needs Trusts

Similarly, pooled special needs trusts also have an obligation to put Medicaid on notice and satisfy their lien out of funds remaining in the trust when the client passes away. Only if there's anything left over does the family have a chance of getting anything.

Again, the pooled trust may be one of three or four strategies we use, so we want to think about that strategically. We don't want to just throw everything into a special needs trust, although it's nice because it keeps the client liquid and able to pay for anything that they need or want during their lifetime.

We want to limit what's in there and, if we can time it properly, set it up so there's either nothing left or very little left by the time the client passes away. This way, we are eliminating or significantly reducing what would have to be paid back.

Which Assets Are Exempt from Medicaid Estate Recovery?

The assets that are generally exempt from Medicaid estate recovery in Florida.

  • A portion of your homestead property,  which is your primary residence, may be exempt (generally up to $713,000 in 2024) if it is your homestead property at the time of your death. 
  • Assets held in certain properly structured trusts may also be exempt from estate recovery.
  • Life insurance proceeds and certain annuity payments directly to a beneficiary (rather than your estate) are typically exempt as well.
  • The same goes for non-probate assets, like jointly-held properties or accounts with designated beneficiaries like retirement accounts.

It's essential to understand these exemptions and plan accordingly to protect your family's inheritance.

Can Medicaid Take Your House in Florida?

One of the most common concerns we hear from clients is, "Can Medicaid take my house?" The short answer is: it depends. If your home is considered a non-homestead-exempt countable asset (meaning it doesn't meet the exemption criteria mentioned earlier), then yes, Medicaid can potentially place a lien on your home or force its sale to recover the costs of your care.

However, there are procedures and timelines in place that give your heirs or family members an opportunity to prevent the loss of your home. For example, they may be able to pay off the Medicaid lien or, in some cases, keep the home if they were residing there and providing care.

But, if a non-homestead home avoids probate, then it should also avoid Medicaid Estate Recovery entirely!

The key takeaway here is that proper planning and understanding of the rules can help you protect your home and other assets from Medicaid estate recovery.

Avoid or Reduce Medicaid Estate Recovery in Florida With Elder Needs Law

While Medicaid estate recovery is a reality in Florida, there are strategies you can employ to avoid or minimize its impact on your estate. At Elder Needs Law, we've helped countless families in Florida protect their hard-earned assets and plan for their long-term care needs.

However, even if you did have to pay back Medicaid, you could still come out on top through strategic Medicaid planning.

When people say, "I don't want even the chance of paying anything back to Medicaid," we say, "Well, all we're doing is giving you or your loved one access to more resources while they're alive, and you're going to get them at a discount." If there's nothing to pay back to Medicaid, then you just received the services essentially for free. But if you did have to pay something back, you're paying back very little compared to the value you've received or your loved one has received over the course of their life receiving long-term care services through Medicaid. So it's a win-win, no matter what.

Don’t try to DIY Medicaid planning. Even seemingly minor missteps can have major consequences down the line. Instead, take proactive steps today to safeguard your legacy and ensure your assets are protected from Medicaid estate recovery. Contact Elder Needs Law for a review of your situation and a personalized plan tailored to your unique needs and goals.

Jason Neufeld

Jason Neufeld is the Founder and Managing Partner of Elder Needs Law, a Florida estate planning and elder law firm he created in 2017. With more than 15 years of experience practicing law, he represents clients in a wide range of legal matters, including Medicaid planning, estate planning, elder law, probate, Medicare, and life insurance.

Jason received his Juris Doctor from the University of Miami — School of Law and is a member of the Florida Bar and the Broward County Bar Association. He has received numerous accolades for his work, including being named a Rising Star and Super Lawyer by Super Lawyers and among the Florida Legal Elite by Florida Trend in 2024.

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