Medicaid Estate Recovery and Your Home

What Medicaid Estate Recovery is

Federal law requires state Medicaid programs to seek reimbursement for certain benefits paid on behalf of a recipient who was age 55 or older — specifically nursing facility services, home and community-based services, and related hospital and prescription drug costs. This has been mandatory nationwide since the 1993 Omnibus Budget Reconciliation Act (OBRA). See Medicaid.gov — Estate Recovery.

Because a primary home is generally exempt from Medicaid's asset limit during life, it's frequently the single most valuable asset still owned at death — which is exactly why it's so often the target of a recovery claim afterward. See American Council on Aging — What is the Medicaid Estate Recovery Program (MERP)?

How the claim works, mechanically

• The state can only recover up to the amount it actually paid for the recipient's care — it cannot claim more than that, even if the estate is worth significantly more.
• All states must recover from the probate estate — property titled solely in the deceased's name, or held as tenants-in-common. Some states use an "expanded" definition reaching non-probate assets too, including certain jointly held property, life estates, and living trusts.
• Recovery follows death; the state typically sends a notice to the estate's representative or heirs describing the claim before it's enforced.

The mandatory exemptions

Federal law prohibits recovery — while the exemption applies — when the deceased recipient is survived by:

• A spouse;
• A child under age 21; or
• A child of any age who is blind or permanently disabled.

Recovery is deferred, not eliminated, in these cases — the state can typically still pursue the claim once these protections no longer apply (for example, after the surviving spouse also passes away).

The undue hardship waiver

States are also required to establish a waiver process for cases where enforcing estate recovery would cause an undue hardship — for example, when the home is a family farm or small business that provides a survivor's primary income, or when recovery would leave an heir without housing. This waiver has to be requested; it is not automatic, and documentation requirements vary by state.

How families protect against it in advance

The most direct protection available in a handful of states is a Lady Bird deed, which moves the home outside of probate at death. In states with an expanded recovery definition, or where a Lady Bird deed isn't available, advance planning tools like a Medicaid Asset Protection Trust — covered on the Advance Medicaid Planning pillar page — are the more common route, provided they're funded at least five years before a Medicaid application.