Conveying Home to Children--Usually a Bad Idea

   A loved one having to enter a nursing home is an extremely emotional and trying time for most families, with the biggest question being, “Can we afford a nursing home?”  Medicaid is a government program that provides financial assistance to help people pay for nursing home care. 

           Many myths exist about qualifying for Medicaid.  One of the biggest myths is that, to qualify, an individual cannot own their own residence.  In response to this myth, many people unwittingly convey the title to their house to their adult children.  Big mistake.  The State of Florida views one’s home as an exempt asset; therefore, it does not count towards Medicaid eligibility.  If there is any equity in the property over $500,000.00, the Department of Children and Family (DCF), the government agency responsible for administering Medicaid benefits, will view that equity as an asset.  This is not an issue for many homeowners; however, if it is, there are ways of qualifying for Medicaid if this “problem” exists for you.

            What happens if the property is conveyed to an adult child or to any other third party for that matter?  If the Medicaid applicant transferred property and did not receive fair market value, there will be a transfer penalty.  DCF will view the transfer as if it was done solely to try to qualify for Medicaid.  The penalty will be for a specified period of time and is dependent on the fair market value of the transferred property.  In viewing an application, DCF will look at the past five years, commonly referred to as the “look back period” to determine if the applicant has given away any property.  Therefore, if the transfer occurred more than five years prior to the filing for Medicaid, there will be no penalty. 

            If the Medicaid applicant transferred the property and did receive fair market value for the property, the applicant will then have assets beyond $2,000.00, the maximum allowed to qualify for Medicaid.  At this point, the applicant will then have to convert the funds from the sale of the house into an exempt asset, e.g. purchasing a house or a car if the applicant did not already own one, both of which are exempt assets. 

            The moral to the story is that the title to one’s primary residence should not be conveyed to qualify for Medicaid.  If you still wish to convey title for purposes other than Medicaid, consult an attorney and ask what will be the repercussions if the transfer occurred.  In matters such as this, it is always best to be as informed as possible.      

Tracy M. Wynter, February 23, 2010