Introduction

While a Medicaid recipient’s home is generally exempt from Medicaid’s asset limit, what happens to their home after they die? Will Medicaid take their home? Will they force a sale? What if a spouse or another family member lives in the home? Can the home be protected as inheritance for one’s family? These are complicated questions and the answers depend on a family’s specific situation, as well as if Medicaid planning strategies were implemented to protect the home from Medicaid’s Estate Recovery Program.

Medicaid Estate Recovery Program Rules

All 50 states and the District of Columbia have Medicaid Estate Recovery Programs (abbreviated as MERP or MER). These programs became mandatory with the passing of the Omnibus Budget Reconciliation Act of 1993. Following the death of a Medicaid recipient 55+ years old, MERPs attempt reimbursement of long-term care costs for which the state paid for that individual. This can be for in-home care, community based care (i.e., adult day care, assisted living services), or nursing home care. Medicaid Estate Recovery is also mandatory for deceased Medicaid recipients under the age of 55 if they were receiving nursing home care.

It is via one’s remaining estate that the state attempts to be repaid. Often, the only asset of any significant value that remains at the time of a Medicaid recipient’s death is their home, and it is often through the home that the Medicaid agency is reimbursed. However, if the deceased has a surviving spouse, a child under 21 years old, or a disabled or blind child of any age, Medicaid cannot attempt Estate Recovery to recover long-term care costs. To be clear, these persons do not have to be living in the home. Furthermore, most states have a limited timeframe in which they can file for Estate Recovery. This is generally one year following the death of a Medicaid recipient.

MERP rules are not consistent across the states. Some states, such as Florida, file for Estate Recovery following the death of the surviving spouse. Other states, such as California and Texas, prohibit Estate Recovery after the surviving spouse dies. The only exception is if the surviving spouse was also a Medicaid recipient.

Another consideration of Medicaid Estate Recovery Programs is that one’s situation and estate planning techniques have an impact on whether or not Medicaid will be able to collect reimbursement from the sale of one’s home. Learn more about MERP.

Can Medicaid Take My Home? Different Scenarios Explained

Single and live alone in the home

For Medicaid beneficiaries who receive long-term care assistance from Medicaid and are 55+ years old at the time of death, a state’s Medicaid agency will file an Estate Recovery claim for reimbursement of home and community based care costs. Once the home is sold, the state will likely collect all or some of the proceeds from the sale as reimbursement (up to the amount the state paid for care). A state cannot attempt reimbursement if the deceased Medicaid recipient has a child under 21 years old or a child of any age who is permanently disabled or blind.

Single and living in a nursing home

The state may file a TEFRA lien against an unmarried nursing home resident’s home if it is believed that their stay in a nursing home is permanent. With a lien, a legal claim is made against the home to collect debt. This does not mean that the home must immediately be sold. It simply means that when it is sold, the state will receive money from the sale for reimbursement of the cost of Medicaid-funded nursing home care. Upon one’s death, the state will file a claim against their estate, including one’s home, to collect funds for repayment of nursing home care expenses.

Single (in a nursing home) and grown children live in the home

After the Medicaid-funded nursing home resident’s death, the home is not safe from Medicaid Estate Recovery unless they have a grown child who is permanently disabled or blind (or have a child under 21 years old). There is, however, the Child Caretaker Exemption, which allows one to transfer their home to their healthy adult child without violating Medicaid’s Look-Back Rule, given specific requirements are met. This protects the home from Medicaid Estate Recovery. However, if there is no child under 21 years, old, the grown children are healthy, and the Child Caretaker Exemption is not applicable, the home is not safe from Medicaid Estate Recovery. After the Medicaid beneficiary’s death, Medicaid will attempt reimbursement of long-term care costs.

Single and has passed away

After the death of a Medicaid recipient, the state will try to recover the cost of long-term care for which it paid through a home sale. The state cannot do this if the deceased has a child that is permanently disabled, blind, or under 21 years old.

Married and one spouse moving to a nursing home

When one’s spouse moves into a Medicaid-funded nursing home, the spouse that remains at home is considered the community spouse, and as such, they are entitled to keep the home. However, it is best to have the home titled solely in the community spouse’s name. As the non-applicant spouse, the home can be transferred to them without violating Medicaid’s Look-Back Period. While the home is safe from Estate Recovery if the institutionalized spouse passes away while the community spouse is living, it isn’t necessarily safe from MERP following the community spouse’s death if the home isn’t solely in their name. Therefore, transferring the home to the community spouse will protect it from Medicaid Estate Recovery. The state will not be able to make a claim against it even after the community spouse’s death. This is because the home will no longer be a part of the former Medicaid recipient’s estate upon the community spouse’s death.

Married and one spouse in nursing home passed away

As long as there is a living spouse, the home is exempt from Estate Recovery. Some states’ Medicaid Estate Recovery Programs attempt recovery of long-term care costs after the death of a surviving spouse. Other states do not try to recover costs unless that spouse was also a Medicaid recipient. California is one such state that does not attempt Estate Recovery if the community spouse (non-applicant spouse) outlives the Medicaid beneficiary spouse.

Both spouses have passed

Depending on the circumstances, a number of scenarios could play out. If both spouses were Medicaid recipients, the state will try to recover the funds in which it spent for long-term care costs. If only one spouse was a Medicaid recipient and passed away before the non-Medicaid spouse, the state may or may not attempt to recover the costs for care (following the death of the non-Medicaid spouse). This depends on the state in which one resides. If the non-Medicaid spouse died prior to the Medicaid recipient spouse, the state will initiate Estate Recovery to recover long-term care costs (following the death of the Medicaid recipient spouse). If the couple has a child who is permanently disabled, blind, or under 21 years of age, Estate Recovery is prohibited.

Both spouses have passed, grown children live in home

Assuming both spouses were Medicaid recipients, the state will try to collect funds for repayment of care via Estate Recovery unless the home was previously transferred to one of their adult children via the Child Caregiver Exception. Another exception exists if the couple has a child under 21 years old or if one of the couple’s grown children is blind or permanently disabled. If only one spouse received Medicaid-funded care and passed away prior to the non-Medicaid recipient spouse, the state may or may not attempt Estate Recovery (after the death of the non-Medicaid spouse). The way this situation is handled is state-specific.

What Can Be Done to Protect the Home?

Keep Assets Out of Probate

Some states only seek Medicaid Estate Recovery through probate, and in these states, there are ways for a Medicaid recipient to keep their home out of probate. Probate is a legal process that involves checking the validity of one’s will, determining the value of the deceased’s assets, and paying any remaining taxes and bills. Keeping the home out of probate keeps one’s home, and proceeds from selling it, safe from Medicaid. Assets solely owned by the deceased go through probate, which means if the house is jointly owned, it will not be included in the probate estate. There is one exception. This is when the home is jointly owned and rather than the deceased’s share of the home automatically inherited by the other owner, the beneficiary is named in the will. See probate only states.

If a home is in a Lady Bird Deed, a type of life estate deed, it will not go through probate. With a Lady Bird Deed, a Medicaid recipient maintains ownership of their home while they are living. Upon their death, home ownership is automatically transferred to another person, often the deceased’s child. Unfortunately, Lady Bird Deeds are only permitted in approximately 5 states.

Irrevocable Trusts

One can protect their home by establishing an irrevocable trust that holds the title of the home. “Irrevocable” means the terms of the trust cannot be changed or canceled. Essentially, a ”trustee” is named to manage the trust and the trust maker is no longer considered the owner of the assets. However, the trust maker’s children can be named as beneficiaries, protecting the home as inheritance. The problem with Medicaid Asset Protection Trusts is timing. This type of transfer violates Medicaid’s Look-Back Rule and creates a Penalty Period of Medicaid ineligibility. Therefore, this strategy generally needs to be implemented 60-months prior to applying for long-term care Medicaid. New York is an exception. While the state currently has no Look-Back Period for long-term Home and Community Based Services, they plan to implement a 30-month “look back” no sooner than sometime in 2025.

Another exception exists when just one spouse of a married couple receives Nursing Home Medicaid assistance. If the home is solely in the name of the community spouse (non-applicant spouse), that spouse can transfer the home into an irrevocable trust without impacting the Medicaid eligibility of the institutionalized spouse.

Long Term Care Partnership Programs

Long-Term Care Partnership Programs help protect all, or a portion, of a Medicaid applicant’s assets from Medicaid’s asset limit, as well as from Medicaid Estate Recovery. Partnership Programs are a collaboration between a private insurance company that sells long-term care partnership policies and a state’s Medicaid program. Essentially, the same dollar amount paid out by a long-term care insurance policy for the policyholder is the same amount “protected” from Medicaid’s asset limit and from Estate Recovery.

As an example, Joe is applying for long-term care Medicaid and has a long-term care partnership policy that paid out $350,000 for his care. This means he can retain up to $352,000 in assets (Medicaid’s asset limit is generally $2,000, so $350,000 + $2,000 = $352,000) and still qualify for Medicaid. Furthermore, up to $350,000 in assets can be declared “protected” from Estate Recovery. His home is worth $300,000 and he claims his home as “protected”. This means Medicaid cannot try to be reimbursed the funds it paid for his long-term care via the sale of his home following his death.

Caregiver Exemption

In most cases, the home cannot be transferred to an adult child without violating Medicaid’s Look-Back Period and jeopardizing one’s eligibility for Medicaid. However, there is one exception known as the Caregiver Child Exemption or Caretaker Child Exception. This rule allows a parent to transfer their home to their adult child without violating the Look-Back Period. The adult child must have lived with their parent at least two years immediately prior to the parent moving to a nursing home, or in some states, receiving Home and Community Based Services (i.e., assisted living services, adult day care, in-home care) via a Medicaid Waiver. Furthermore, the adult child must have provided a level of care during this time that delayed the parent’s need for this care.

Sibling Exemption

The Sibling Exemption allows the home to be transferred to a sibling who is part owner of the house. They must have lived in the home for at least one year immediately prior to their sibling moving into a Medicaid-funded nursing home, or in some states, receiving Home and Community Based Services (i.e., assisted living services, adult day care, in-home care) via a Medicaid Waiver. Unlike with the Caregiver Child Exemption, the sibling is not required to have provided care for their brother or sister. Transferring the home via the Sibling Exemption must be done correctly in order to avoid violating Medicaid’s Look Back Period and creating a period of Medicaid ineligibility.

Work with a Certified Medicaid Planner

Protecting one’s home from Medicaid is extremely complicated. It involves planning and knowledge of federal and state laws. With Medicaid Planning, it is strongly advised one seek the counsel of a Professional Medicaid Planner. Incorrectly implementing a planning strategy or improperly transferring one’s home can result in Medicaid ineligibility. Furthermore, since the rules involving Estate Recovery are state-specific, what may protect a home in one state doesn’t necessarily protect it in another state.