Grandparents Raising Grandchildren and Florida Medicaid: The Minor in the Home

Loretta's situation: a house, two kids, and a dialysis diagnosis

Loretta is 74 and lives in Palatka. After her son's wife passed away, she took in her two grandchildren, now 9 and 12, and has raised them in the home she has owned for decades. Her kidneys are failing, dialysis has started, and her daughter-in-law (the children's aunt by marriage, who remains close to the family) has started asking the hard questions: if Loretta ends up needing a nursing home, what happens to the house? What happens to the kids? Loretta is a composite drawn from situations I see often in my practice, not an actual client, but her questions are the real questions grandparent caregivers bring me.

This article stays narrowly on that scenario. I have written elsewhere about how Florida Medicaid eligibility, the five-year lookback, and the penalty period work in general. Here I want to focus on what is different when the person in the home raising dependent children is not a parent, but a grandparent.

Does the home stay protected when grandchildren live there?

Florida Medicaid excludes an applicant's primary residence from the $2,000 countable asset limit as long as the applicant intends to return home, or certain dependent relatives continue living there. One of those protected categories is a child under age 21 who resides in the home. Loretta's grandchildren, ages 9 and 12, fit squarely within that protection.

What that means practically: if Loretta applies for nursing home Medicaid, her home does not have to be sold or counted against her simply because she can no longer live in it, as long as her grandchildren continue to reside there. If no qualifying relative lived in the home, Florida applies a home equity cap, adjusted periodically, above which the home becomes a countable asset. With a minor child in residence, however, that equity cap does not come into play at all. The exemption is automatic on this point, regardless of the home's value.

This is a real difference from a single retiree with an empty house. The presence of Loretta's grandchildren is doing legal work for the family, protecting the home itself from being pulled into the asset calculation.

Can Loretta give the house, or other assets, to the grandchildren without a penalty?

This is where families often assume the rules are more generous than they actually are, so it is worth being precise.

• Transfers of assets (including cash, not limited to the home) to a child under 21 are an established exception to Florida's Medicaid transfer penalty. Florida Medicaid recognizes that parents have an ongoing legal obligation to support their minor children, and it does not penalize a parent for providing for that child financially.
• The home-transfer caregiver exception is narrower and does not reach grandchildren. There is a well-known Medicaid rule that lets a parent transfer a home penalty-free to an adult child who lived there and provided care that delayed the parent's nursing home placement. That exception is limited to a natural or adopted child of the applicant. A grandchild, a daughter-in-law, or a foster child does not qualify, even if that person is the one who actually provided the care.

Here is the key distinction for Loretta: her grandchildren are not her legal children under Florida Medicaid's transfer rules, even though she is their caregiver and they are dependents in her home. If Loretta wanted to transfer her house outright to her grandchildren before applying for Medicaid, that transfer would generally be treated as a gift to a non-exempt party and could trigger a penalty period, unless some other exception applied. The fact that a minor lives in the home protects the home from being counted while Loretta still owns it. It does not automatically let her give that home away to the grandchildren penalty-free.

Who takes care of the grandchildren if Loretta can no longer do it?

Medicaid planning protects assets and pays for care. It does not, by itself, answer who raises the children. That is a separate legal question, and it is often the one that keeps grandparents like Loretta up at night.

Florida law gives grandparents raising grandchildren several tools, distinct from Medicaid, to formalize who steps in:

• Temporary or extended family custody under Chapter 751, Florida Statutes allows a grandparent or other relative to petition for legal and physical custody of a minor. Courts generally require clear and convincing evidence related to the parents' unfitness, abandonment, or neglect before granting this kind of order, particularly where a surviving parent's rights are involved.
• A designated or standby guardian can be named in advance, so that if Loretta becomes incapacitated or passes away, a chosen person (such as her daughter-in-law) is positioned to step into the caregiving role without a gap or a contested court proceeding happening in crisis conditions.
• A will or trust naming a guardian for minor children expresses Loretta's wishes to the court, though the court retains final authority over who is appointed.

This is where Loretta and her daughter-in-law did real planning work together. They did not wait for a crisis. They talked through who would take the children, put that intention into formal guardian nomination paperwork, and coordinated it with Loretta's broader estate plan so that the answer would not depend on which family member happened to be in the room on a bad day.

What financial protections exist for the grandchildren themselves?

Separate from Medicaid planning for Loretta, the grandchildren may have their own benefits and resources worth coordinating:

• Survivor benefits through Social Security may be payable to minor children following a parent's death, depending on the deceased parent's work history. These benefits belong to the child, not to Loretta, and are generally managed by a representative payee.
• Kinship care support through the Florida Department of Children and Families exists to help relative caregivers raising children outside the traditional foster care system. DCF's ACCESS system is also the portal through which Loretta would apply for her own Medicaid coverage, so the same state agency touches both halves of this family's situation, even though the programs are distinct.
• A trust for the grandchildren, funded by Loretta's estate plan rather than by a late-life transfer made to qualify for Medicaid, can hold assets for their benefit, managed by a trustee of Loretta's choosing, distributed over time rather than handed to a minor outright at 18.

Loretta's plan used this last tool carefully. Rather than attempting to transfer her house to the grandchildren directly, which would have risked a Medicaid penalty, her estate plan directs what happens to the home after her lifetime, coordinated with the guardian nomination for the children and with her daughter-in-law's role as trustee. The Medicaid exemption protects the house while Loretta is alive and the children are minors living there. The estate plan addresses what happens afterward.

Sources

• Alper Law Group, "Florida Homestead and Medicaid Eligibility, Estate Recovery, and Planning," updated March 2026
• Elder Needs Law, "Florida Medicaid Child Caregiver Exception Explained," 2024
• Elder Needs Law, "Florida Medicaid Exempt Assets Full Guide," 2024
• DHC Law, "Exceptions to the Florida Medicaid Transfer Penalty," 2024
• KMG Law, "What Transfers are Exempt from the Medicaid Transfer Penalty?," 2024
• Yolofsky Law, "Florida Grandparents & Temporary Custody of Grandchildren," 2024
• Mark Moss Law, "Grandparents Raising Grandchildren: Legal Tools to Protect Your Family," August 2026

This article is for general informational purposes only and does not constitute legal advice, nor does reading it create an attorney-client relationship. Florida estate, elder, probate, and real estate law are fact-specific and change over time. Consult a licensed Florida attorney about your individual circumstances. Arthur Simpson, Esq. is licensed to practice law in the State of Florida. Attorney advertising.