A nursing home cannot take your house. The state Medicaid agency that paid for your care can, and usually will try, after you die. Federal law requires every state to seek reimbursement from the estate of anyone 55 or older who received Medicaid-funded nursing facility care, and for most families the home is the largest thing in that estate.1Medicaid.gov. Estate Recovery While you are alive, the house is generally protected. The real risk comes later, and several federal rules decide whether your family keeps it.
The House Is Safe While You Are Alive
To qualify for Medicaid nursing home coverage, an individual generally cannot have more than $2,000 in countable assets. The primary residence is excluded from that count, so nobody has to sell the house just to get eligible for care.2U.S. Department of Health and Human Services. Medicaid Treatment of the Home: Determining Eligibility and Repayment for Long-Term Care
The exemption depends on intent. As long as the Medicaid recipient states an intent to return home, the home stays exempt regardless of value. A signed statement is usually enough, even when a return is unlikely.2U.S. Department of Health and Human Services. Medicaid Treatment of the Home: Determining Eligibility and Repayment for Long-Term Care Intent doesn’t even matter when a spouse, a child under 21, or a blind or permanently disabled child of any age lives there. Their presence protects the home on its own.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
The Home Equity Cap
There is one important limit. States can deny Medicaid nursing home coverage if the applicant’s home equity exceeds a federally set threshold. Each state picks its own figure within the federal range. For 2025, the minimum cap was $730,000 and the maximum was $1,097,000, adjusted annually for inflation. The cap does not apply when a spouse, minor child, or blind or disabled child lives in the home.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
When a State Can Put a Lien on the House During Your Lifetime
Federal law allows a state to attach a lien to the real property of a Medicaid recipient who is permanently institutionalized and who the state has determined, after notice and a hearing opportunity, cannot reasonably be expected to return home.3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets This lien does not force a sale. It sits on the property and must be satisfied if the home is sold.
The state cannot place the lien at all if any of these people live in the home:
- A spouse.
- A child under 21, or a child of any age who is blind or permanently disabled.
- A sibling who has an equity interest in the home and lived there for at least one year before the recipient entered the institution.
If the recipient recovers and returns home, the state must remove the lien.1Medicaid.gov. Estate Recovery
Don’t Just Give the House Away: The Five-Year Look-Back
One of the biggest mistakes families make is transferring the house right before applying for Medicaid. When someone applies for Medicaid nursing home coverage, the state reviews every asset transfer made during the previous 60 months. Any transfer for less than fair market value in that window triggers a penalty period of Medicaid ineligibility.4Centers for Medicare and Medicaid Services. Transfer of Assets in the Medicaid Program
The penalty is the value of what was transferred, divided by the average monthly private-pay nursing home cost in the applicant’s state. Give away a $300,000 home in a state where the divisor is $10,000, and the result is 30 months of ineligibility. Worse, the penalty period does not start until the person is already in a nursing facility, has spent down to the asset limit, and has applied for Medicaid. In other words, the clock starts when they are stuck in the facility with no way to pay.4Centers for Medicare and Medicaid Services. Transfer of Assets in the Medicaid Program
Divisors vary widely. A transfer that produces a 12-month penalty in one state can produce a 25-month penalty in another.
Transfers That Don’t Trigger a Penalty
Federal law allows certain transfers of the home without any look-back consequences:3Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
- To a spouse, at any time.
- To a child under 21, or a child of any age who is blind or permanently disabled.
- To a sibling who co-owns the home and lived there for at least one year immediately before the owner entered a nursing facility.
- To a caregiver child: a biological or adopted child who lived in the home for at least two continuous years immediately before the parent’s institutionalization and provided care that delayed the need for a nursing home. In-laws, stepchildren, and grandchildren do not qualify.
The caregiver child exemption is the one families most often try to use and the one that most often fails. The two years must be continuous and must immediately precede the move to the facility. The child must have actually provided hands-on care, and documentation, often including a physician statement, is typically required to show that care delayed institutionalization. A brief move-out before the parent entered the nursing home defeats the exemption.
Estate Recovery: What Happens to the House After Death
The protections that shield the home during life largely disappear at death. Federal law requires every state to run a Medicaid Estate Recovery Program. States must seek reimbursement from the estate of anyone who was 55 or older when they received Medicaid-funded nursing facility services, home and community-based services, or related hospital and prescription drug services.1Medicaid.gov. Estate Recovery
The state becomes a creditor of the estate. The home, often the only significant asset left, is the primary target, and it may need to be sold to pay the claim. The state can only recover what it actually spent on the person’s care; anything above that goes to the heirs.5U.S. Department of Health and Human Services. Medicaid Estate Recovery
Probate Estates Versus Expanded Estates
How aggressively a state can pursue the house depends on how it defines “estate.” At a minimum, every state recovers from assets that pass through probate, which covers property transferred by a will and property of people who die without a will.5U.S. Department of Health and Human Services. Medicaid Estate Recovery Some states stop there. Others use an expanded definition that reaches assets passing outside probate, including property held in joint tenancy, life estates, and assets in living trusts. A strategy that avoids probate in one state might still leave the home exposed in another.
Who Blocks Estate Recovery
Federal law bars states from pursuing estate recovery in certain situations. The state cannot recover from the estate when the deceased Medicaid recipient is survived by:1Medicaid.gov. Estate Recovery
- A surviving spouse. Recovery is completely off the table while the spouse is alive, though a claim may still surface after the surviving spouse’s death.
- A child under 21.
- A child of any age who is blind or permanently disabled.
The surviving spouse protection is the biggest of these. It buys the family time to plan.
Undue Hardship Waivers
States must also have procedures for waiving estate recovery when it would cause undue hardship.1Medicaid.gov. Estate Recovery A waiver may apply when the property is a working farm or family business that supplies the heirs’ primary income, or when recovery would push the heirs onto public assistance. Heirs must apply and provide financial documentation. Standards differ from state to state, and waivers are not automatic.
Planning Ahead to Keep the House in the Family
The single most important factor in protecting a home from estate recovery is time. Nearly every effective strategy has to clear the five-year look-back, so families who start when a loved one is already in decline have far fewer options.
Medicaid Asset Protection Trusts
A Medicaid Asset Protection Trust is an irrevocable trust that holds the home outside the owner’s estate. The original owner gives up control, so the home is not counted for Medicaid eligibility and is not part of the estate at death. The transfer into the trust must happen at least five years before applying for Medicaid. Inside the look-back window, it counts as a penalizable transfer and can produce a long ineligibility period.
Life Estate Deeds
A life estate deed splits ownership. The life estate holder keeps the right to live in the home until death, and the remainder beneficiaries automatically own it after. Because the property passes outside probate, it can escape recovery in states that limit recovery to probate assets. In expanded-estate states, life estates may still be reachable. Creating a life estate also raises the same look-back issue if done within five years of a Medicaid application, though buying a life estate for fair market value and living there for at least one year afterward may avoid the penalty.
Both strategies share the same tension: the home has to move out of the owner’s name early enough to clear the look-back, while the owner still has to live somewhere and keep the house maintained. An elder law attorney can help work through the timing. Families who wait until a nursing home admission is imminent usually find that their only remaining option is the hardship waiver, which is uncertain at best.