Can Medicaid Take Your House? Exemptions and Estate Recovery

Medicaid generally cannot take your house while you are living in it, but after you die the state is federally required to try to recover what it paid for your long-term care, and your home is often the largest asset available to satisfy that claim. Whether Medicaid can actually take your house comes down to three things: whether you still live there, who survives you, and whether you planned the transfer of the property well in advance.

Your Home Is Exempt While You Live There

When you apply for Medicaid long-term care, your primary residence is not counted against the asset limits that determine whether you qualify, as long as your equity stays below a cap your state sets. For 2026, that cap falls between $752,000 and $1,130,000 depending on the state.¹ Federal law sets a base amount and lets each state choose a higher threshold up to the maximum, with both figures adjusted for inflation each year.²

Exempt does not mean invisible. Medicaid knows your home exists; the value simply isn’t counted when the agency decides whether your assets are low enough to qualify. If your equity is above the state limit, you would need to bring it down before becoming eligible.

The exemption also depends on the home actually being your residence. Generally, you must intend to return home, or a qualifying family member must live there. If you enter a nursing facility and no spouse, dependent child, or qualifying sibling remains in the property, the state can start to question whether it still counts as your primary residence.

The One Time the State Can Claim the House During Your Life

A TEFRA lien is the only claim a state can place on your home before you die, and it applies only if you have been permanently institutionalized. Before a lien can attach, the state must determine, after giving you notice and a chance for a hearing, that you cannot reasonably be expected to leave the facility and return home.² The lien does not force a sale. It is a legal marker that puts everyone on notice of the state’s future claim against the property.

Even a TEFRA lien is blocked when certain people live in the home: your spouse, a child under 21, a blind or disabled child of any age, or a sibling with an equity interest who has lived there for at least a year.² And if you are discharged and return home, the state must dissolve the lien entirely.³

Estate Recovery: Where the House Is Actually at Risk

The real financial exposure comes after death, through the Medicaid Estate Recovery Program. Federal law requires every state to seek repayment from the estates of people who were 55 or older when they received Medicaid benefits, and from anyone permanently institutionalized at any age.⁴⁵ Recoverable services include nursing facility care, home and community-based services, and related hospital and prescription drug costs. The state cannot recover more than Medicaid actually paid on your behalf.

What counts as your “estate” depends on the state. In every state, it includes assets that pass through probate: a home held in your name alone, bank accounts, investments. About half of states use an expanded estate definition that also reaches assets bypassing probate, such as jointly held property, assets in a living trust, and accounts with designated beneficiaries.² Whether your state uses the basic or expanded definition matters enormously, because planning strategies that move a home outside probate only work in states that stick to the narrow definition.

Who Blocks Recovery Against Your House

Federal law bars estate recovery entirely, no matter how much Medicaid spent, while any of these people survive you:

A surviving spouse. Recovery is postponed until after the surviving spouse also dies, and some states then pursue a claim against that spouse’s estate.
A child under 21.
A child of any age who is blind or permanently disabled.

These protections are not discretionary. The statute flatly prohibits recovery while these individuals are alive.⁴²

Two more protections apply specifically to the home. Recovery is blocked if a sibling who lived in the home for at least a year before the recipient entered the facility has continued living there ever since, or if an adult child who lived there for at least two years before admission and provided qualifying care has remained there ever since.² The continuous residence requirement is strict. Moving out even temporarily can destroy the protection.

One nuance worth understanding: the surviving spouse protection is a delay, not always a permanent shield. Federal law allows recovery “after the death of the individual’s surviving spouse.” Some states use that authority to file a claim against the surviving spouse’s estate at the second death, and if the home is still there, it can still be reached.

Undue Hardship Waivers

When none of the automatic protections apply, heirs still have one more avenue. Every state must have a process for waiving estate recovery when enforcing it would cause undue hardship.⁴ It is not automatic. Heirs must apply, explain the circumstances, and provide supporting evidence to the state Medicaid agency.

Criteria vary by state, but common qualifying situations include:

The property is the sole income-producing asset for the heirs, such as a family farm or small business, and losing it would end their livelihood.
Enforcing the claim would push the heirs onto public assistance, or prevent them from getting off benefits they already receive.
The home’s value is well below the area average, making recovery disproportionate.

Many heirs never learn hardship waivers exist. States must have the process but aren’t always required to proactively point it out. If you receive an estate recovery notice, ask the Medicaid agency about its hardship waiver application before assuming the claim is final.

Planning Ahead: What Can Actually Protect the House

Several legal tools can reduce or eliminate Medicaid’s ability to recover against a home, but all of them require planning years in advance.

Lady Bird Deeds

A Lady Bird deed, also called an enhanced life estate deed, lets you keep full control of your home during your lifetime while automatically transferring it to a named beneficiary at your death, outside probate. Because you keep the right to sell, mortgage, or revoke the deed at any time, executing one is not treated as a transfer for Medicaid purposes and does not trigger a look-back penalty. Because the property passes outside probate, it is shielded from estate recovery in states that use only the basic probate-based definition of “estate.”⁶

The limitation is geographic. Lady Bird deeds are recognized in roughly 15 states, including Florida, Texas, and Michigan. And they do not help in states with an expanded estate definition, because those states can still reach non-probate property.

Irrevocable Trusts

Transferring your home into an irrevocable trust can remove it from your estate for Medicaid purposes, but the trust must be genuinely irrevocable. You cannot keep the ability to revoke it, change beneficiaries, or direct the trustee to sell the property and return the proceeds to you. A revocable living trust provides no Medicaid protection at all, because the assets are still treated as yours.

The critical timing issue is the 60-month look-back. A transfer into an irrevocable trust is treated as a gift, so it must be completed at least five years before you apply for Medicaid long-term care. For people already in their late 70s or 80s when they start thinking about this, that five-year horizon can be hard to meet.

Why Simply Giving the House Away Backfires

The most common instinct, and the one that causes the most damage, is transferring the house to a child shortly before applying for Medicaid. If you give away your home or sell it for less than it’s worth, and then apply for Medicaid long-term care within 60 months, Medicaid imposes a penalty period during which you are ineligible for benefits.⁷ The 60-month window applies to any transfer made on or after February 8, 2006.

The penalty length is calculated by dividing the value of what you gave away by your state’s average monthly nursing home cost, and the divisor varies significantly by state. Worse, the penalty period doesn’t start when you made the transfer. It begins when you would otherwise be eligible for Medicaid and are receiving or seeking institutional care. You’ve already given the asset away, you need nursing home care, you qualify financially, and you still can’t get benefits because of a transfer years earlier.

Federal law does exempt specific home transfers from the look-back entirely. You can transfer your home without penalty to:

Your spouse, with no timing or residency restrictions.
A child under 21, or a child of any age who is blind or permanently disabled.
An adult son or daughter who lived in your home for at least two years immediately before you entered a facility and provided care that let you stay home rather than in an institution.
A brother or sister with an equity interest in the home who lived there for at least one year before you became institutionalized.

These protected relationships match the ones that block TEFRA liens and estate recovery. Federal law consistently shields the same family caregiving arrangements across all three stages of Medicaid’s relationship with your home.²

What Estate Recovery Actually Looks Like

When a Medicaid recipient dies, the state files a claim against the estate during probate, like any other creditor. The personal representative handling the estate must notify creditors and settle debts before distributing anything to heirs. When the home is the main estate asset, the claim usually means the home has to be sold to generate funds for repayment.

The claim is capped at what Medicaid actually paid.⁴ If Medicaid paid $150,000 and the home is worth $250,000, the state takes $150,000 and the remaining $100,000 goes to heirs. If the home is worth less than Medicaid paid, the state recovers only what the sale produces and cannot pursue heirs personally for the difference.

States generally do not rush to foreclose. Most will work with families on a timeline for selling the property, and some have minimum estate value thresholds below which they do not pursue recovery at all. The process runs through ordinary probate channels. If you are an heir facing an estate recovery claim, you have the right to contest the amount, verify it matches actual Medicaid expenditures, and apply for an undue hardship waiver before any property changes hands.

1
Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
2
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
3
U.S. Department of Health and Human Services ASPE. Medicaid Liens – Section: TEFRA (Pre-Death) Liens
4
Medicaid.gov. Estate Recovery
5
U.S. Department of Health and Human Services ASPE. Medicaid Estate Recovery
6
Scholarship @ Hofstra Law. A Safe Harbor in the Medicaid Adventure: Lady Bird and Transfer on Death Deeds
7
Office of the Law Revision Counsel. 42 U.S. Code 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets