As You Get Older, You May Need Medicaid. Protect Your Deed.

Medicaid is a popular program, funding healthcare needs. For millions of eligible people, these needs include nursing home stays.

First, the good news. Most people don’t have to sell their homes to qualify for nursing home funds.

Now, the not-so-welcome news. The state could record a lien on your title and collect from your estate after your death. This process is known as estate recovery.

OK, what do you need to know in order to protect the value in your home equity?

Medicaid Recovers What It’s Owed, With Liens

Medicaid records liens at the county Recorder of Deeds’ office for the medical debt you accrue. To sell your home, you have to pay off liens.

If you transfer your deed, you have to wait five years before applying for Medicaid assistance — or face a penalty. That period could extend even longer than five years, depending on the home’s value.

But if particular people live in your home with you, your state is not at liberty to record a lien to recover Medicaid nursing home costs.

Note that when a spouse or dependent relative leaves the home, the state might attempt to recover your medical debt.

Let’s break this down…

Who Lives in the Home? How Much Equity Is There? Exceptions to the Penalty

As a deed holder, even after you go into assisted living, you may qualify for Medicaid. And you may transfer your home deed without having to wait or pay a penalty, to these people:

• Your spouse.

• A child who is under age 21, or blind or disabled.

•  A trust for the sole benefit of your child who is blind or a person who is permanently disabled (possibly even where the Medicaid applicant is the trust beneficiary).

• A co-owner who is your sibling and who has lived in the home during the year before you moved out.

• A caregiving child who lived with you two or more years before you moved out, enabling you to stay home during that time.  

The government also provides a path to apply for an undue hardship waiver to save the property from Medicaid recovery. As you go through the process in your state, you’ll see the description of a legally qualifying undue hardship, plus the form.

Medicaid requirements vary by state. Deed holders should consult a legal expert in the state to anticipate the consequences — either before a deed transfer, or when the deed holder plans to move into assisted living.

Is the deed holder going into a nursing home only temporarily? Most state Medicaid programs won’t count the home as a recoverable asset if the home equity is less than $713,000 (as of 2024; the dollar limit rises yearly). But the government can still record an estate recovery lien after the Medicaid recipient dies, unless one of the above-listed exceptions apply.

What to Ask Your Attorney When You Meet

Medicaid benefits are complicated. We cannot provide case-specific financial or legal advice. But we can offer you a checklist, so you have questions lined up for your local estate planning or elder law expert:

• I want to list my home for sale. How long will this make me ineligible for Medicaid benefits?

• Can Medicaid make claims on the profit I make from my home sale?

• The homeowners are spouses, vested as tenants by the entirety. Is our deed off-limits to a state seeking Medicaid recovery?

• Should we transfer the home into the name of the co-owner who is less likely to need care in the next few years?

• Should the spouse named on the deed change their will so the other spouse doesn’t show an inheritance that Medicaid could recover?   

• Should we transfer the deed and/or other assets to children or grandchildren? What would be the tax impact? Would the transfer impact important benefits available to younger generations?

• Should we set up an irrevocable trust instead, to avert potential Medicaid recovery?

Professional guidance helps deed holders fully understand the estate-planning consequences of transferring assets.