Key Takeaways
- 1States must attempt to recover Medicaid costs from your estate after death
- 2Your home is the primary target for Medicaid recovery
- 3Recovery can only happen after death of recipient AND spouse
- 4Certain heirs (disabled, minor, caretaker) can prevent recovery
- 5Proper planning 5+ years ahead can protect your estate
- 6Lady Bird deeds and irrevocable trusts are key protection tools
- 7Not all assets are subject to recovery - know what's protected
What Is Medicaid Estate Recovery?
Federal law requires all states to attempt recovery of Medicaid long-term care costs from the estates of deceased recipients. This means after you die, the state may claim assets from your estate to repay what Medicaid spent on your nursing home care.
- Mandatory program - All states must have estate recovery programs under federal law.
- Nursing home focus - Recovery primarily targets long-term care costs (nursing home, home care).
- After death - Recovery only happens after the Medicaid recipient dies.
- Spouse protection - States cannot recover while a surviving spouse is alive.
- Amount owed - The state seeks to recover the total cost of Medicaid benefits paid.
Costs Add Up Fast
Average nursing home care costs $8,000-$15,000 per month. A 3-year stay could result in a $300,000+ estate recovery claim.
What Assets Are at Risk
The primary target for Medicaid estate recovery is the family home, but other assets may also be claimed depending on your state.
- Real estate - Your home is the primary recovery target in most states.
- Bank accounts - Cash and savings in your name at death.
- Personal property - Vehicles, jewelry, and other valuable items.
- Life insurance - If your estate is the beneficiary (not if named beneficiary).
- Retirement accounts - Only if payable to estate; beneficiary designations usually avoid this.
| Asset Type | At Risk? | Protection Strategy |
|---|---|---|
| Home (in your name) | Yes | Transfer to trust, Lady Bird deed |
| Home (in trust) | No* | If transferred 5+ years prior |
| Joint bank account | Partial | Surviving owner may claim their share |
| Life insurance (named bene) | No | Goes directly to beneficiary |
| IRA/401k (named bene) | No | Goes directly to beneficiary |
| Car | Yes | Transfer or gift before death |
When Recovery Is Blocked
Several situations prevent or delay Medicaid estate recovery:
- Surviving spouse - No recovery while spouse is alive, regardless of where they live.
- Minor child - If the deceased has a child under 21, recovery is delayed until child is 21.
- Disabled child - Recovery is permanently blocked if there's a blind or disabled child of any age.
- Caretaker child - A child who lived with parent 2+ years and provided care may keep the home.
- Sibling with equity - A sibling who lived in home 1+ year before institutionalization and has equity.
Caretaker Child Exception
If your adult child moved in and cared for you for at least 2 years before you entered a nursing home, and this care delayed your institutionalization, they may be able to keep the family home.
State-by-State Differences
While federal law sets minimums, states have flexibility in how aggressively they pursue recovery.
- Probate-only states - Most states only recover from assets that pass through probate.
- Expanded recovery - Some states (like California) use "expanded estate recovery" to reach more assets.
- Lien states - Some states place liens on homes during life; others only file claims after death.
- Hardship policies - States vary in how easily they grant hardship waivers.
- Lady Bird deed states - Only some states recognize these deeds as recovery-proof.
Strategies to Protect Your Estate
With proper planning, you can legally protect assets from Medicaid estate recovery.
- 1Irrevocable trust - Transfer home to MAPT at least 5 years before needing Medicaid.
- 2Lady Bird deed - In states that allow them, property passes outside probate and estate recovery.
- 3Life estate deed - Retain right to live in home while transferring remainder interest (partial protection).
- 4Beneficiary designations - Ensure all retirement accounts and life insurance have named beneficiaries (not "estate").
- 5Spousal protection - For married couples, the healthy spouse can keep significant assets.
- 6Caretaker agreement - Document care provided by family members to support caretaker child exemption.
Hardship Waivers
If estate recovery would cause undue hardship, you may request a waiver.
- Income-producing property - If the home is the family's sole income source.
- Modest estate value - Some states waive recovery for small estates (varies by state).
- Heir hardship - If recovery would force heir onto public assistance.
- Family home - If heir has no other housing and limited income.
- Must apply - Hardship waivers are not automatic; heirs must apply and demonstrate need.
Protecting Wealth Across Generations
Estate recovery is just one threat to generational wealth. Diversifying assets into precious metals within proper planning structures provides multiple layers of protection.
- Physical gold provides hedge against many risks
- Self-directed IRA with proper beneficiaries avoids probate
- Trusts can hold precious metals for estate planning
- No counterparty risk with physical precious metals
- Creates tangible legacy for heirs
Frequently Asked Questions
Can Medicaid take my house while I'm in a nursing home?
Medicaid cannot force you to sell your home while you're alive. Your home is an exempt asset. However, a lien may be placed on the property. After you die (and after your spouse dies if married), the state can seek recovery from the home through your estate.
What if I want to leave my house to my children?
Without planning, your home may be subject to Medicaid estate recovery, meaning your children might not inherit it. Protection strategies include irrevocable trusts (5+ year lookback), Lady Bird deeds (in some states), or qualifying a child for the caretaker or sibling exemption.
Does Medicaid recovery apply to all Medicaid, or just nursing home?
Federal law requires recovery for nursing home care, home and community-based services, and related hospital/prescription costs. States can choose to expand recovery to other Medicaid costs, but most focus on long-term care.
What if I die with no assets?
If there's nothing in your estate, there's nothing to recover. This is why proper planning (beneficiary designations, trusts, transfer on death deeds) that moves assets outside your probate estate is so effective.
Can I give away my house to avoid recovery?
Yes, but timing matters. If you give away assets within 5 years of applying for Medicaid, you face a penalty period. If you give away assets and then need Medicaid within 5 years, you may be ineligible for the penalty period. Plan early - ideally 5+ years before needing care.