During the estate planning process, many people recognize that they may need long-term care someday. Unfortunately, most health insurance policies and Medicare do not come with long-term care coverage, and the cost of nursing homes and similar facilities can be exorbitant.
However, if you can qualify for Medicaid, you may be eligible for long-term care benefits. Medicaid planning involves managing your assets and income to make sure that you qualify for Medicaid coverage.
If you need to reduce your total assets to qualify, you can’t just give your money away one day and apply for Medicaid the next. By planning ahead, though, you can strategically lower your net worth so you qualify by the time you need long-term care. But how much money can you give away and still qualify for Medicaid? Here’s a closer look.
Understanding Medicaid Gifting and Eligibility
In Florida and elsewhere, there are strict income and asset limits for Medicaid eligibility. Medicaid is a program for medically needy people, so these limits are lower than you might think.
Florida has different income and asset limits for each type of Medicaid applicant. For a single person applying for a nursing home or long-term care program, the 2025 limits are as follows:
- Income Limit: $2,901 per month
- Asset Limit: $2,000
The 2025 limits are different for married couples with both spouses applying:
- Income Limit (Total): $5,802 per month
- Income Limit (Each Spouse Separately): $2,901 per month
- Asset Limit: $3,000
These are the 2025 limits if you’re married with only one spouse applying for Medicaid:
- Income Limit (Applicant): $2,901 per month
- Asset Limit (Applicant): $2,000
- Asset Limit (Non-Applicant): $157,920
Medicaid considers some assets to be exempt from the asset limit. Generally, these include your home, car, home furnishings, and personal belongings.
However, even with these exemptions, the Medicaid asset limits are so low that many potential applicants don’t qualify. To meet these limits, many people consider giving some of their savings to loved ones.
Does gifting help Medicaid eligibility? It can, but not if it happens during the Medicaid “lookback period.”
When you apply for Medicaid, the state of Florida will look closely at any gifts or asset transfers completed during the five-year period prior to your application.
The government conducts this review to ensure that you haven’t given your assets away just to qualify for Medicaid’s long-term care benefits. If there were no lookback period, it would be easy for those of substantial wealth to qualify for care they could easily afford themselves.
Medicaid defines a “gift” as any asset transfer where you received less than fair market value in exchange. For example, if you sell a fairly new luxury car to a friend for $1,000, that would count as a gift.
Gifting for Medicaid eligibility may be possible if you plan ahead. If you’re wondering, “How much money can you give away and still qualify for Medicaid?” you should know that while there isn’t a dollar limit on the assets you can give away, there is a time constraint. If you need to give away assets to qualify for a Medicaid program, you must do so more than five years before you apply for Medicaid.
The Medicaid Lookback Period and Transfer Penalties
What happens if you exceed asset transfer limits for Medicaid in FL during the lookback period? Fortunately, you don’t permanently lose Medicaid eligibility. However, you’ll be subject to a transfer penalty that disqualifies you from receiving Medicaid for a certain period of time.
Calculating a transfer penalty is fairly simple. Start by taking the amount of assets you transferred and divide it by the average monthly cost of a nursing home stay in Florida.
Here’s an example. Imagine you have a tract of land with a fair market value of $110,000. You sell it to your child for $10,000.
Because your child paid a portion of the cost, the total amount of improperly transferred assets is $100,000. Suppose that the average monthly cost of a nursing home stay in Florida is $10,000. If you divide $100,000 by $10,000, the result is 10. That means you won’t be eligible for Medicaid for another 10 months.
Understanding the Gift Tax vs. Medicaid Gifting Rules
Many people trying to qualify for Medicaid benefits accidentally confuse Medicaid rules and tax rules. Specifically, they may incorrectly believe that the annual gift tax exclusion extends to Medicaid eligibility.
For 2025, the annual gift tax exclusion is projected to be $19,000. You may make financial transfers of up to $19,000 per person without having to file a gift tax return. Filing this return does not mean that you have to pay taxes on these gifted assets, however. You would only pay a gift tax if you gave someone more than $13.99 million over your lifetime and through bequests after your death.
Still, if you make any gifts during Medicaid’s five-year lookback period, there will be a penalty imposed since you will have to wait longer until you qualify.
Safe Transfers and Exemptions to Medicaid Penalties
Avoiding Medicaid penalties for gifts is one of the most critical parts of Medicaid planning. However, you might be relieved to know that some asset transfers are excluded.
Although most transfers involving significant assets will trigger a transfer penalty, there are a few exceptions:
- A transfer of assets to your spouse (or to someone else for your spouse’s benefit)
- A transfer of assets to a trust for the sole benefit of a blind or disabled child
- A transfer of assets to a trust for the sole benefit of a permanently disabled person under 65
Notably, if the asset you’re transferring is your home, there are even more exceptions. You may transfer your home to any of the following people without triggering a transfer penalty:
- A blind or disabled child
- A child under 21
- A sibling who (1) lived in the home in the year before you were institutionalized and (2) has equity in the home
- A caretaker child
Medicaid has a very specific definition of a caretaker child. One of your adult children may be considered a caretaker if they lived in your home for at least two years before you went to a nursing home. During those two years, they must have given you care that prevented you from needing long-term care.
Asset Protection Strategies to Preserve Medicaid Eligibility
Giving away most of your assets to qualify for Medicaid can be a scary proposition. However, it may be possible to protect assets without giving them up entirely.
Our elder law attorneys may be able to help you determine a strategy (or a combination of strategies) to protect some of your assets. These are some of the most common options.
Medicaid Asset Protection Trusts
A Medicaid Asset Protection Trust (MAPT) is often the first choice for shielding assets from Medicaid. MAPTs are irrevocable trusts, which means it is very difficult to change the terms after they are set up.
When you transfer assets into the trust, you lose direct control over them. However, you may still benefit from the assets. For example, if you transfer your home into an MAPT, you can probably still live in the home. Here’s a brief rundown of how the MAPT process works:
- Work with an attorney to create the trust
- Fund the trust with stocks, real estate, savings, or other assets
- Appoint a trustee (often an adult child) to manage the trust
Even though you can’t directly access any money you put into an MAPT, you may be able to collect the income it generates.
This strategy could help you protect your assets while ensuring they go to your loved ones after your death. However, Medicaid’s five-year lookback rule still applies. You must establish and fund your MAPT at least five years before your Medicaid application.
Lady Bird Deeds (Enhanced Life Estate Deeds)
You may already be aware of the Florida Estate Recovery Program. After your death, Florida may try to access assets from your estate to recoup the cost of your long-term care. If you want to protect your home from this process and make sure it goes to a beneficiary of your choice, a Lady Bird Deed may be right for you.
Florida is one of only a few states that recognize Lady Bird Deeds. These deeds allow you to transfer your home to a beneficiary without it going through probate. Until the point of your death, you continue to own and control the home.
A Lady Bird Deed can also preserve your eligibility for Medicaid. Because your beneficiary doesn’t receive the home until after your death, creating the deed does not count as a transfer of assets.
Medicaid-Compliant Annuities
If you’re married and you need to lower your total assets so you or your spouse can qualify for Medicaid, a Medicaid-compliant annuity (MCA) is worth considering. By converting some of your “countable” assets (assets that count toward the limit) into “non-countable” (exempt) assets, an MCA may help you become eligible for Medicaid.
To start an MCA, you purchase the annuity with a single lump sum. The MCA then makes monthly payments to the spouse who isn’t applying for Medicaid. This strategy is especially useful for married couples because it helps one spouse meet the asset limit while ensuring the spouse who doesn’t need Medicaid receives a steady income.
However, setting up an MCA can be complex. To preserve Medicaid eligibility, the annuity must meet the following criteria:
- Payments to the recipient must begin right away
- The annuity must be irrevocable
- It may not be sold or transferred to another person
- It must be actuarially sound (meaning it’s designed to pay back the principal over the owner’s lifetime)
- Payments must be fixed and equal
- Florida’s Medicaid agency must be the primary beneficiary (the state recovers any remaining funds after the owner’s death)
A Medicaid planning attorney can verify that your annuity complies fully with Florida Medicaid laws.
Spending Down Extra Assets
If you strategically spend extra assets on what you need, you may be able to achieve Medicaid eligibility without triggering a penalty period. Make sure that anything you spend money on directly benefits you, your spouse, or both. These are some common examples:
- Purchasing prepaid funerals
- Paying off debt
- Making home repairs or improvements
- Buying necessary medical supplies or paying for medical care
- Buying a new vehicle
- Buying new clothing, electronics, furniture, or other everyday items
If you’re spending down assets during the lookback period, you should keep documentation showing what the money was spent on. Without this documentation, you could end up with a transfer penalty.
Working With a Medicaid Planning Attorney
Medicaid gifting rules in Florida are complicated, and the stakes are high. If you misunderstand Medicaid rules and make an improper asset transfer during the lookback period, you might face a significant penalty period where you’re ineligible.
Concerns about your own long-term financial well-being are also valid. When you send in your Medicaid application, your financial situation for the past five years will be scrutinized. This means that if you’re considering transferring assets to qualify, you must do so at least five years before you apply.
A lot can happen in five years. If you’ve given away most of your assets, you might have little to no financial cushion to fall back on. You could find trouble if you encounter a major unexpected cost.
Ideally, you should work with an elder law attorney to prepare for the future. At The Florida Estate Firm, we are deeply familiar with the Medicaid program’s strict rules regarding assets. If you are concerned about Medicaid ineligibility, we can help you create a strategy.
Are You Hoping to Qualify for Medicaid Assistance?
For many people, the possibility of needing long-term care seems distant. It’s easy to put off Medicaid planning until it’s too late. However, any elder law attorney will tell you that the best time to prepare for long-term care is right now, even if you don’t think you’ll need nursing home Medicaid benefits for many years.
The Florida Estate Firm is here to help you navigate the often-confusing process of Medicaid planning. If you have questions or you’re ready to get started, contact us today.