Medicaid and Your Home: Can Medicaid Recover Money From Your House After You Die?

Most homeowners understand that a mortgage doesn't simply disappear when someone dies.

They may understand that taxes, HOA obligations and other liens still have to be dealt with.

But there's another potential claim against an estate that catches families completely by surprise:

Medicaid.

Federal law requires states, in certain circumstances, to seek repayment from the estates of deceased Medicaid recipients for particular benefits Medicaid paid during the recipient's lifetime. For Medicaid recipients age 55 or older, mandatory estate recovery generally includes nursing-facility services, home- and community-based long-term-care services and certain related hospital and prescription-drug services.

And depending on the circumstances, real estate can absolutely become part of that recovery.

Can Medicaid Take the House?

Potentially, the home's value can be involved in satisfying a Medicaid estate-recovery claim.

But saying:

"Medicaid automatically takes your house"

isn't accurate.

Medicaid generally asserts a repayment claim against assets legally subject to estate recovery.

If real estate is part of those assets and there isn't enough other money available, the home can become central to resolving the claim.

That might mean the property is sold and the claim is paid from proceeds.

It might mean a lien or claim has to be resolved before heirs can sell or refinance.

Or an exemption, deferral or hardship rule may apply.

There Are Important Family Protections

Federal Medicaid rules generally prohibit estate recovery while the deceased Medicaid recipient is survived by:

• A spouse
• A child under age 21
• A blind child
• A disabled child of any age

States must also establish procedures to waive recovery when it would create an undue hardship.

So the answer isn't automatically:

"Medicaid gets the house."

But neither should families assume Medicaid has no claim.

What If the House Is in a Trust?

This is where one of the biggest misunderstandings happens.

Someone creates a living trust and assumes:

"The house isn't in my personal name anymore, so Medicaid can't recover against it."

That is not a safe assumption.

A normal revocable living trust can be extremely useful for estate planning and probate avoidance.

But:

Probate avoidance and Medicaid asset protection are not the same thing.

Putting a house into a typical revocable living trust does not automatically shield that house from Medicaid estate recovery.

The Medicaid rules look at much more than whose name appears on the front page of a trust document.

They can consider the type of trust, who created it, whose assets funded it, who controls it, who can receive distributions, state law and when the transfer occurred.

Federal Medicaid guidance specifically notes that, under certain conditions, money remaining in a trust after a Medicaid enrollee dies may be used to reimburse Medicaid.

Revocable Trust vs. Irrevocable Trust

This distinction matters.

With a typical revocable living trust, the person creating the trust generally retains substantial control.

They can often amend it.

Revoke it.

Move assets.

Sell the house.

Change beneficiaries.

From a Medicaid-planning perspective, retaining that level of control is important.

A properly structured irrevocable trust can operate differently.

Under certain circumstances and with proper advance planning, assets transferred into certain irrevocable arrangements may receive different Medicaid treatment.

But this is where people can get themselves into serious trouble trying to do their own Medicaid planning.

You Can't Necessarily Move the House at the Last Minute

Medicaid long-term-care eligibility rules contain transfer restrictions designed to prevent someone from simply giving away substantial assets immediately before applying for Medicaid.

This is commonly associated with Medicaid's five-year look-back period.

That means someone generally shouldn't assume they can wait until long-term care is needed, transfer the house to the children or into some new trust, and automatically protect the property.

The timing, structure and circumstances matter enormously.

An improper transfer can potentially affect Medicaid eligibility.

This is exactly why Medicaid asset planning belongs with a qualified elder-law attorney.

A Trust That Avoids Probate May Still Have a Medicaid Problem

This deserves repeating.

A trust can work perfectly for its intended estate-planning purpose and still not accomplish Medicaid asset protection.

Those are different goals.

A revocable trust might:

• Make administration easier.
• Allow a successor trustee to manage the property.
• Avoid certain probate proceedings.
• Provide instructions for distributing the property.

And still leave Medicaid estate-recovery issues that need to be addressed.

Nevada Homeowners Need to Be Particularly Careful

Nevada's treatment of Medicaid recovery and non-probate transfers makes this especially important.

Nevada law expressly provides that its deed upon death statutes do not limit Medicaid recovery.

So even using a deed designed to transfer the property automatically at death should not be interpreted as automatically defeating a Medicaid claim.

This illustrates the larger point:

Changing how the house transfers at death doesn't necessarily eliminate claims associated with the deceased owner.

Medicaid Can Sometimes Place a Lien During the Recipient's Lifetime

Estate recovery generally focuses on recovery after death.

However, federal law also permits states in certain circumstances to place liens against real property during the lifetime of a Medicaid recipient who is permanently institutionalized.

There are significant protections when certain relatives live in the home, including a spouse, qualifying child or, in some circumstances, a sibling with an equity interest.

If the institutionalized Medicaid recipient is discharged and returns home, the state must remove that type of lien.

Again:

Going into a nursing facility doesn't automatically mean Medicaid takes your house.

But the house can become part of the Medicaid analysis.

What Happens When the Family Wants to Sell?

Imagine this:

Mom dies owning a house.

Her children believe they inherited it.

They put the house on the market.

A buyer makes an offer.

Then title work reveals a Medicaid estate-recovery issue.

Suddenly everyone needs answers.

• How much is Medicaid claiming?
• What benefits are included?
• Is recovery currently permitted?
• Is there a surviving spouse?
• Is there a protected child?
• Does a hardship exception apply?
• Is there a lien?
• Can the claim be resolved through closing?
• Does probate have to occur?

Those questions can take time.

Which is why, once again:

Find these issues before you have a buyer waiting.

Estate Planning and Medicaid Planning Are Different

This is probably the single most important takeaway from this article.

Someone may have an excellent estate plan.

They may have a will.

They may have a trust.

They may have a deed upon death.

They may have named every beneficiary correctly.

And they still may not have done any Medicaid planning.

Those are separate issues.

If protecting real estate from potential future Medicaid recovery is an objective, it should be discussed with an elder-law attorney before Medicaid eligibility or long-term-care needs become an immediate crisis.

Your Home May Be Your Family's Largest Asset

For many Americans, their house is the largest asset they'll ever own.

It's also often the asset everyone assumes will simply pass to the next generation.

Sometimes it does.

Sometimes there's a mortgage.

Sometimes there's probate.

Sometimes there are liens.

And sometimes Medicaid has a recovery claim nobody in the family knew existed.

Understanding that possibility early gives families the opportunity to make informed decisions.

Know how the property is titled.

Know what your trust actually does.

Understand that avoiding probate does not automatically avoid Medicaid recovery.

Know whether Medicaid benefits could create an estate-recovery issue.

And don't wait until the property is under contract to start asking questions.

Viking Title can help identify how property appears in the public land records and flag recorded issues that may deserve further investigation.

But Medicaid asset protection, elder-law planning and estate planning should be handled with qualified legal professionals.

Because when it comes to Medicaid and real estate, the time to understand the rules is before your family has to deal with them.

This article provides general educational information only and is not legal, Medicaid-planning, tax or estate-planning advice. Medicaid eligibility, trust treatment and estate-recovery rules vary by state and individual circumstances and can change. Consult a qualified elder-law or estate-planning attorney regarding your particular circumstances.