Second Home and Medicaid Eligibility

How does owning a second home affect Medicaid Eligibility in Florida?

When determining your Medicaid eligibility benefits in Florida, the state takes an inventory of all of your financial assets and income resources. Medicaid planning depends on whether your financial assets can be arranged in a manner that satisfies the Medicaid income and asset tests. Not all property counts towards the calculation of these tests, some assets are exempt from determining your eligibility while others are not. For example, your primary residence would not be counted against your assets regardless of its of value. However, there are limits on your home’s equity value when it comes to long-term care and nursing home services. If your home’s equity exceeds $572,000, Medicaid will not pay for your long-term care services. A second home, or any other real estate property that you own which does not serve as your primary residence, will not be exempt under most circumstances. In other words, your second home will count towards the income and asset test. There is one strategic exception to this rule: income-producing rental properties.

Income-Producing Rental Properties

Suppose a Florida Medicaid applicant owns a second home or other real estate property and rents it out to a separate individual. In that case, this property will not be counted as an asset according to the Medicaid eligibility rules. This is true even if the Medicaid applicant rents the property to a family member or friend, so long as the rental price is at a rate comparable to other similar rental properties in the area. This is because, under Medicaid rules, the funds used to purchase a second home would be investment assets that Medicaid considers to be a “non-countable asset.” Therefore, those funds would be not be held against the applicant when determining eligibility.

Even under the circumstance that the second home is a vacation property that is only rented out seasonally, Florida Medicaid would determine the vacation home to be an income-producing resource, and the fair market value of any income-producing property would be deemed exempt.

Let us explore an ideal, real-life strategic application of this exception: an elderly applicant whose income surpasses the threshold, has adult children who would like to live near their parent. The elderly applicant could take their countable cash and use it to purchase a rental home for their adult children to rent (at market value rates), and therefore transition those funds into non-countable assets. The money that the applicant uses to fund the purchase of an income-producing rental property reduces their overall wealth, as those funds no longer count towards the applicant’s assets when applying for Medicaid.

It s important to note, however, that although the funds used to purchase the property are exempt, the rental income produced from the property does count towards your income limit.

Medicaid Deeds

After an elderly applicant’s death, the state of Florida is required to attempt to recoup Medicaid benefits from the applicant’s estate via probate. A rental property may become part of the applicant’s estate, and the state may seek to recover against their property unless steps are taken to avoid probate. A life enhanced estate deed, also known as a lady bird deed, gives the applicant a life estate interest in their property. Upon their death, however, the lady bird deed ensures that all of the applicant’s vested interests in the property are eradicated, and their listed beneficiaries inherit the property directly, without it being subject to Florida probate laws.

To discuss whether any of the above strategies are right for you when applying for Medicaid, call to schedule a free consultation with one of the experts at Elder Solutions Law Firm today.