Medicaid does not automatically seize a home upon an applicant’s enrollment, but federal law requires states to attempt recovery of long-term care costs from a deceased beneficiary’s estate. While the primary residence is often considered an “exempt asset” for eligibility purposes, state-run Medicaid Estate Recovery Programs (MERP) may place liens on property or seek repayment after death, subject to specific legal protections for surviving spouses, children, or disabled dependents.
How Medicaid Estate Recovery Works
Federal law mandates that states operate an estate recovery program to recoup funds spent on long-term care services, such as nursing home stays and home-based care, according to the Centers for Medicare & Medicaid Services (CMS). This process only begins after the beneficiary has died.
The recovery is limited to the assets that pass through the probate estate under state law. If a home is owned as “joint tenants with rights of survivorship,” the property interest may pass directly to the surviving owner, potentially shielding it from probate and, in many jurisdictions, from estate recovery. However, rules vary significantly by state, and some states have expanded their definition of “estate” to include assets that pass outside of probate.
When Is a Home Protected from Recovery?
Medicaid rules include specific exemptions that prevent the state from pursuing a claim against a home, even if the beneficiary received long-term care benefits. Under Section 1917 of the Social Security Act, states are prohibited from recovering assets if any of the following individuals are living in the home:
- A surviving spouse.
- A child under age 21.
- A child of any age who is blind or permanently and totally disabled.
- A sibling with an equity interest in the home who has resided there for at least one year prior to the beneficiary’s admission to a medical institution.
Additionally, if a child served as a “caretaker child”—residing in the home for at least two years immediately before the parent entered a nursing facility and providing care that delayed the parent’s institutionalization—the state may grant a hardship waiver to prevent recovery.
The “Intent to Return” Rule
During the application process, a home is generally considered an exempt resource if the applicant intends to return to it. According to the Medicaid Planning Assistance organization, this rule applies regardless of whether the applicant is currently living in a nursing home.
However, there is an equity limit on this exemption. In 2024, if the equity interest in the home exceeds $713,000 (a figure that adjusts annually based on inflation), the applicant may be ineligible for long-term care benefits unless a spouse or dependent child resides there. Some states have opted to increase this equity limit up to $1,071,000.
Key Considerations for Co-Owners
When a parent and child co-own a home, the legal structure of the deed dictates the outcome. If the property is held as “tenants in common,” the parent’s share of the property becomes part of their probate estate upon death, making it vulnerable to a Medicaid lien.
Because state laws govern the specifics of recovery, legal experts often advise families to consult with an elder law attorney in their specific state. Regulations regarding “look-back periods”—the five-year window where transferring assets can trigger a penalty—also play a critical role in how property is treated for eligibility. Families should review the specific state Medicaid manual for their jurisdiction to understand local recovery thresholds and exemption policies.