States must seek recovery from the estate of anyone who was 55 or older when Medicaid paid for nursing facility services, home and community-based services and related hospital and prescription drug services, but only after a surviving spouse has died and only when there is no surviving child under 21 or blind or disabled child (42 U.S.C. 1396p(b), checked October 14, 2026).
What estate recovery is
Estate recovery is the state's claim, after a Medicaid recipient dies, to be repaid for care Medicaid paid for. Federal law requires every state to seek it in two cases (42 U.S.C. 1396p, checked October 14, 2026):
- People who were 55 or older when they received the care. The required recovery covers nursing facility services, home and community-based services, and related hospital and prescription drug services. A state may choose to recover for other Medicaid services too, except Medicare cost-sharing help (42 U.S.C. 1396p(b)(1)(B)).
- People of any age who were permanently in a nursing home or similar institution and subject to a lien, described below (42 U.S.C. 1396p(b)(1)(A)).
The claim is limited to what Medicaid paid. It is a claim against the estate, not against children personally.
What counts as the estate
At a minimum, the estate is everything that passes through probate under state law. A state may choose a wider definition that also reaches property passing outside probate, such as property held in joint tenancy, tenancy in common, a life estate or a living trust, to the extent of the person's interest at death (42 U.S.C. 1396p(b)(4), checked October 14, 2026).
That choice is the biggest difference between states. In a state that recovers only from the probate estate, a house that passes outside probate may not be reachable. In a state with the wider definition, it may be. Ask your state Medicaid agency which definition it uses, and ask an elder law attorney before changing how the house is titled, because a change in title can be a transfer under the Medicaid look-back period.
When recovery must wait, and hardship waivers
Federal law limits when a state may recover. Recovery may happen only after the death of the surviving spouse, if any, and only when there is no surviving child who is under 21 or is blind or disabled (42 U.S.C. 1396p(b)(2)(A), checked October 14, 2026). For a house under a lien, recovery also waits while either of these people lawfully lives in the home: a brother or sister who lived there at least one year before the person entered the institution, or a son or daughter who lived there at least two years before and gave care that kept the parent at home (42 U.S.C. 1396p(b)(2)(B)).
States must also have a process to waive recovery when it would cause undue hardship, under federal standards (42 U.S.C. 1396p(b)(3)). What counts as hardship, and the deadline to ask, is set by each state. Read any notice from the state carefully and ask for the waiver rules in writing.
Liens while the person is alive
A state may place a lien on the home of a living Medicaid recipient only in narrow cases: the person is in a nursing home or similar institution, must pay all but a small personal allowance toward care, and the state decides after notice and a chance for a hearing that the person cannot reasonably be expected to return home (42 U.S.C. 1396p(a)(1)(B), checked October 14, 2026). These are often called TEFRA liens, after the Tax Equity and Fiscal Responsibility Act of 1982, which added this section to the law (same source, history notes).
No such lien may be placed while the spouse, a child under 21, a blind or disabled child, or a sibling with an ownership share who lived there at least a year lawfully lives in the home. The lien ends if the person is discharged and returns home (42 U.S.C. 1396p(a)(2) and (a)(3)). The law allows these liens but does not require them, so ask whether your state uses them.
Can a nursing home take your house?
A nursing home does not take a house because a resident is on Medicaid. The risk to the house comes from the state's estate recovery after death, a lien in the narrow cases above, or unpaid private bills that are owed like any other debt. While a person is alive, the home is usually an excluded asset for Medicaid eligibility, within the state's home equity limit of $752,000 to $1,130,000 in 2026 (CMS, Informational Bulletin: Updated 2026 SSI and Spousal Impoverishment Standards, April 27, 2026). See Medicaid spend-down.
Families then face a choice. Keeping the house can protect a spouse or child who lives there, and if it passes at death the heirs generally get a basis equal to its value at death for income tax (26 U.S.C. 1014, checked October 14, 2026), but it may be subject to recovery. Selling it turns an excluded asset into countable cash that must be spent before Medicaid pays. The page on selling a house to pay for a nursing home walks through the tax side.
When keeping the house can make sense
Recovery is not automatic loss. If a spouse will live in the house for years, recovery waits. If a disabled adult child survives, recovery may never happen. If the house is modest and care is short, the claim may be small next to the value. Families can also pay the claim from other money and keep the house.
For free help, find your Area Agency on Aging through the Eldercare Locator (1-800-677-1116). To see what a stay could cost before Medicaid starts, see how much long-term care costs.
A plain example: what estate recovery can claim
Hypothetical: a widow owns a $450,000 home and $2,000 in cash. Medicaid paid her nursing home for 30 months at a hypothetical state rate of $8,000 a month. She dies in a state that recovers from the probate estate, and the house passes through probate. We assume 6% selling costs (hypothetical) and ignore other debts and probate costs.
| Item | Amount |
|---|---|
| Medicaid paid: 30 months x $8,000 | $240,000 |
| House sale price | $450,000 |
| Less selling costs at 6% | $27,000 |
| Plus cash | $2,000 |
| Estate available | $425,000 |
| State's claim (limited to what Medicaid paid) | $240,000 |
| Left for heirs | $185,000 |
Arithmetic: $450,000 minus $27,000 plus $2,000 = $425,000; $425,000 minus $240,000 = $185,000. Change one fact and the answer changes: if her husband were still alive, recovery would wait until his death. If she had a disabled adult son, no recovery could be made while he is alive. If the house had passed outside probate, the result would depend on whether her state uses the wider estate definition.
Red flags
- Being told "Medicaid takes your house" with no mention of the spouse and child protections.
- Advice to deed the house to a child "so Medicaid cannot touch it," without a look-back and tax review.
- Assuming a living trust or joint ownership always avoids recovery. Some states reach those assets.
- Ignoring a notice from the state Medicaid agency or missing the hardship waiver deadline.
- Being pressured to sell the house quickly to pay a facility without seeing how the sale affects Medicaid eligibility.
- A buyer offering cash "before the state gets it" at well below market value.
- A child moving into the house without records of residence and care, then expecting the caregiver protection.
- A planner who sells a product as the answer to estate recovery.
- Being told every state follows the same estate recovery rules.
- Signing a facility admission agreement that makes a child personally responsible for the bill without reading it first.
Questions to ask before you sign
- Does my state recover only from the probate estate, or from assets passing outside probate too?
- Which Medicaid services does my state recover for, beyond the required ones?
- Does my state use liens on the homes of nursing home residents?
- What are my state's hardship waiver rules and deadlines?
- If my spouse stays in the house, when could recovery happen?
- Would our adult child qualify as a caregiver child, and what proof is needed?
- How will a change in how the house is titled affect the look-back period?
- Will the state send a statement of what Medicaid paid, and can we check it?
- If we keep the house, what basis will our heirs have for income tax?
- If we sell the house, how long will the proceeds pay for care before Medicaid applies?
Long-Term Care and Your Home: Read This Before You Sign
A one-page checklist: what Medicare will and will not pay, the Medicaid look-back and estate recovery basics, the questions to ask before you buy long-term care coverage or take a reverse mortgage, and the tax rules if the house is sold. Estate recovery on one page: what the state can claim, who is protected, and what to ask about the house. We’ll email it to you.
The Retirement Literacy Foundation is a 501(c)(3) public charity (EIN 41-5062266). General education, not tax, legal or investment advice. Nothing is sold here. Unsubscribe any time.
Sources
- Cornell Law School LII: 42 U.S. Code 1396p, Liens, adjustments and recoveries, and transfers of assets (checked October 14, 2026)
- CMS: Informational Bulletin, Updated 2026 SSI and Spousal Impoverishment Standards (April 27, 2026)
- Cornell Law School LII: 26 U.S. Code 1014, Basis of property acquired from a decedent (checked October 14, 2026)
- CareScout: Cost of Care Survey 2025 (data tables dated March 2, 2026)
- Administration for Community Living: Eldercare Locator (checked October 14, 2026)
The Retirement Literacy Foundation is a 501(c)(3) public charity. This page is general education, not tax, legal or investment advice. Nothing is sold here, no product is recommended, and RLF accepts no funding from financial companies. Rules and figures change; each one above shows its source and date. Check anything you plan to act on with your state insurance department or a qualified professional who is not paid on the product.