Florida Lady Bird Deeds and Medicaid Eligibility
A retained life estate (sometimes referred to as a “Lady Bird Deed”) transfer by deed to you and your children (called “remaindermen”) together as owners does not become effective until your death. When you transfer property by Lady Bird Deed, the Department of Children and Families does not consider the property to have been “transferred” for purposes of the 60-month (five years) lookback period, even though you have signed and recorded the deed. This means that a Lady Bird Deed does not disqualify you from receiving Medicaid benefits you would otherwise receive. This is clearly stated in Section 1640.0613.01 of the Florida ESS Policy Manual, which governs Florida’s Medicaid program. When an individual retains a life estate using a lady bird deed, he or she retains life estate rights so no complete transfer has occurred. The individual retains full ownership powers in the property and it is only upon his or her death that the property transfers ownership to the remaindermen. Because you retain the rights to your property during your lifetime, the deed is simply disregarded for Medicaid purposes. This means that a transfer by Lady Bird Deed will not negatively affect your Medicaid eligibility.
Lady Bird Deeds have another important benefit: protection from Medicaid recovery. Most states—including Florida—have a program in place that allows the government to seek reimbursement from your assets after your death. If, for example, Medicaid paid $100,000 in benefits during your lifetime, the Department of Children and Families may file a claim against your assets after your death for $100,000 to reimburse Medicaid for the benefits paid. This claim reduces the assets that would otherwise pass to your children or other loved ones. But in Florida, unlike other states, Medicaid recovery is limited to the assets included in the probate estate. When property is transferred using a Lady Bird Deed, the property passes automatically at your death, outside probate. This means that property transferred using a Lady Bird Deed is not included in your probate estate and, as a result, is not subject to Medicaid recovery at your death
Be careful not to make gifts of money, securities or other property to children. These will have to reported when making an application for Medicaid and will be considered assets that could have been used to pay for your care if you still had these assets. The value will be calculated and you will not be eligible for governmental benefits until the end of the spend-down period for the total value of these gifts.
There is no estate, inheritance or income tax in Florida. For most families the estate will not be subject to the Federal estate tax because the value of the estate must exceed the applicable exclusion amount. For a person who died in 2019 it is $11,400,000.