You may wonder whether Medicaid will claim your home – and the answer is not as simple as “yes” or no.” While your home is not immediately at risk when you apply, federal law allows states to recover some costs after you pass away. By understanding these rules and taking proactive steps, you can safeguard your property and also preserve your family’s peace of mind.
Here is what you need to know --- and the strategies that can help protect your home and prese3rve our family’s financial security:
Medicaid and Your Home
Medicaid is a joint federal and state program that provides health coverage to individuals who meet strict medical, income, and asset requirements. Although Medicaid is a means-tested program, your primary residence can often be treated as an exempt asset if you declare an intent to return home.
That said, this exemption comes with limits. Federal law sets a home equity cap — in 2025, it ranges from $730,000 to $1,097,000, depending on your state’s rules.
If your home’s value exceeds this limit or you transfer ownership improperly, you could affect your eligibility or expose your property to recovery later.
Liens and Estate Recovery
Many people are surprised to learn that Medicaid can place a lien on a recipient’s home during their lifetime. This authority comes from the Tax Equity and Fiscal Responsibility Act (TEFRA).
A TEFRA lien may be placed if:
- The individual is permanently institutionalized and not expected to return home.
- The individual receives notice and an opportunity to contest the lien.
- No spouse, child under 21, disabled child, or sibling with an equity interest is living in the home.
If the recipient later returns home, the lien must be removed. If the home is sold during the recipient’s lifetime, the state may recover up to the amount of Medicaid benefits paid. Otherwise, the lien remains and is recovered after death.
It’s important to note that TEFRA liens are optional — some states use them, while others do not.
Estate Recovery After Death
Regardless of whether a lien was ever placed, estate recovery after death is mandatory. States must attempt to recover costs from the estates of deceased Medicaid recipients who were 55 or older when they received benefits for nursing home care, home-based services, or related assistance.
Each state defines “estate” in its Medicaid plan, and that definition determines what property can be claimed:
Limited Estate Recovery: Recovery is limited to the probate estate — assets that pass-through probate after death; or
Expanded Estate Recovery: The state can recover from both probate and non-probate assets, including property held in joint tenancy, life estates, revocable living trusts, or other arrangements.
Protecting Your Home
While Medicaid estate recovery rules are strict, several strategies may protect your home — either by delaying recovery or preventing it altogether.
Three Emergency Options
- Deferrals: Often estate recovery can be deferred while a surviving spouse, a child under 21, or a disabled child continues living in the home. However, a deferral only postpones recovery — it does not eliminate it.
- Undue Hardship Waivers: Some states may grant a waiver of recovery if it would cause undue hardship, such as depriving an heir of a home or creating significant financial distress.
- Exempt Transfers: Federal law allows certain transfers of the home — for example:
- To a spouse
- To a child under 21 or a disabled adult child
- To a sibling with an equity interest who has lived in the home
- To a caregiver child who lived in the home and provided care for at least two (2) years before institutionalization, with medical documentation showing that this care delayed the need for nursing home placement
However, in crisis situations, gifting a home can create several complications. The recipient may face capital gains tax if the property is later sold, and because the home becomes the legal property of the recipient, they are not required to share it with siblings or other heirs. Additionally, once the transfer is complete, the original owner loses control, and they cannot usually return to their home even if they recover from needing assisted living.
Proactive Planning Strategies
When time is on your side, proactive planning can make all the difference. With the right estate and asset protection tools, you can create a flexible, long-term strategy that safeguards your home, preserves eligibility for benefits, and gives your family lasting peace of mind. Below are two (2) options that may help your family:
Beneficiary Deeds or Transfer-on-Death Deeds
In states with limited estate recovery, transferring your home through a beneficiary deed (also called a ladybird deed or transfer-on-death deed) can keep the property out of probate and avoid recovery. These transfers only take effect at death, preserving Medicaid eligibility during life and giving the home a step-up in basis for tax purposes. However, this approach may not work in states that use expanded recovery or impose TEFRA liens.
Medicaid Asset Protection Trust (MAPT)
A Medicaid Asset Protection Trust is one of the most effective long-term planning tools. By transferring your home into an irrevocable trust, you separate ownership (held by the trust) from control (retained by the trustee), shielding the property from both eligibility assessments and estate recovery — as long as the transfer occurs outside the Medicaid look-back period (typically five years). This type of trust allows you to continue living in the home while preserving it for your beneficiaries.
“The way to get started is to quit talking and begin doing.” – Walt Disney
Medicaid Home Protection Strategies
While Medicaid can recover costs from your estate after death, there are proven strategies to protect your home and your family’s future. TEFRA liens during life are discretionary for some states --- however, estate recovery is mandatory, making proactive planning essential. Tools like deferrals, undue hardship waivers, exempt transfers, beneficiary deeds, and Medicaid Asset Protection Trusts can safeguard your home and assets.
Taking action now can turn uncertainty and overthinking into confident, proactive planning. By protecting your family’s future, you can minimize costly legal battles, reduce unnecessary Medicaid recoveries, and safeguard your home and assets — giving you and your loved ones’ peace of mind for years to come.
If you are in need of assistance, the attorneys at Collins Family & Elder Law Group can help.
