When someone receives Medicaid benefits, especially for long-term care, the government may have the right to seek repayment from that person's estate after death. This is called Medicaid estate recovery, and it catches many families completely off guard. Understanding how the program works, which assets are at risk, and what protections exist can mean the difference between leaving something behind for your family and losing it to the state.
Every state operates a Medicaid Estate Recovery Program (MERP) by federal law. While the basic framework is set at the federal level, states have significant flexibility in how broadly they apply it. In 2026, the rules remain largely consistent with recent years, but a handful of state-level changes are worth knowing, particularly if you or a loved one is approaching or already receiving Medicaid long-term care benefits.
What Is Medicaid Estate Recovery?
Medicaid estate recovery is the process by which state Medicaid agencies recoup costs paid on behalf of a deceased beneficiary. Federal law under 42 U.S.C. 1396p requires every state to have an estate recovery program. The state files a claim against the deceased recipient's estate during the probate process, similar to how any creditor would.
The scope of recovery depends on two things: the age of the recipient and the type of services received.
Who is subject to estate recovery:
- Anyone age 55 or older who received Medicaid-covered nursing facility care
- Anyone age 55 or older who received home and community-based services (HCBS)
- Anyone age 55 or older who received related hospital and prescription drug services tied to long-term care
- In some states, individuals who were permanently institutionalized at any age
States are not allowed to pursue estate recovery from anyone under 55 unless that person was a permanent nursing home resident.
What Assets Can the State Claim?
The answer depends heavily on which state you live in.
Probate-Only States
In states that limit estate recovery to probate assets, only property passing through the deceased person's estate via probate court is subject to a claim. Assets that automatically transfer to a surviving co-owner or named beneficiary are typically safe. This includes:
- Joint bank accounts with right of survivorship
- Retirement accounts with a named beneficiary
- Life insurance proceeds payable to a named beneficiary
- Transfer-on-death (TOD) or payable-on-death (POD) accounts
- Property held in a living trust
If you live in a probate-only state, keeping assets out of probate is one of the most effective ways to protect them.
Expanded Estate Recovery States
Approximately 27 states use an expanded definition of "estate" that goes beyond probate. In these states, the Medicaid agency can pursue non-probate assets as well, including jointly held real property, life estate interests, interests in certain trusts, and even annuity remainder payments.
New York, for example, expanded its definition effective 2011 to include non-probate assets. If you are in an expanded recovery state, planning strategies need to be more comprehensive and typically require an elder law attorney.
Mandatory Protections: When the State Cannot Collect
Federal law sets minimum protections that every state must follow. The state cannot file an estate recovery claim if:
| Protection | Details |
|---|
| Surviving spouse | Recovery is deferred until the spouse also dies |
| Child under age 21 | Claim is suspended while the child is living and under 21 |
| Blind or disabled child of any age | Claim is permanently deferred as long as the child is alive |
| Sibling with equity interest | If the sibling lived in the home for at least one year before the Medicaid recipient entered a nursing facility, recovery is deferred |
| Caregiver adult child | In some states, if an adult child lived in the home for at least two years before institutionalization and provided care that delayed nursing facility placement, recovery may be waived |
These are federal floors. Some states provide broader protections, but no state can offer less.
Hardship Waivers
Every state must offer a hardship waiver process. A waiver can be granted when estate recovery would cause an undue hardship to the heirs. Common hardship situations that states recognize include:
- The estate is the sole income-producing asset of a surviving heir (such as a family farm)
- The heir would need to apply for public benefits if the estate were recovered
- The property is a homestead valued at 50% or less of the average home price in the county
- The heirs are elderly or disabled themselves
Hardship waiver applications must typically be filed within a set deadline after the state files its claim, often 30 to 90 days. Missing this window can result in losing the right to contest the claim.
State-by-State Variations in 2026
States differ substantially in how aggressively they pursue recovery and what additional protections they extend.
| State | Recovery Scope | Notable Rules |
|---|
| California | Limited for 55+ | Reinstating asset limits in 2026; MERP applies to long-term care costs |
| Texas | Probate-only, 55+ | Does not pursue estates valued under $10,000 |
| Georgia | 55+ | Does not pursue estates valued under $25,000 |
| Massachusetts | Limited LTSS only | Law changed August 2024 to limit recovery to long-term care costs only for 55+ |
| Mississippi | Minimum required | Limits recovery to federally mandated services only |
| New York | Expanded | Includes non-probate assets since 2011 |
| Florida | 55+ | Lady Bird deeds available to avoid probate |
Massachusetts made a significant change effective August 1, 2024, narrowing its recovery to focus on long-term care services only for the 55 and older group, rather than all Medicaid costs. This is a meaningful protection for residents who received community Medicaid but not nursing home care.
Legal Strategies to Protect Assets
Planning ahead is far more effective than trying to respond after a claim is filed. The following strategies are commonly used, each with trade-offs depending on your state and timeline.
1. Medicaid Asset Protection Trust (MAPT)
A Medicaid Asset Protection Trust (MAPT) is an irrevocable trust that removes assets from your countable estate. Assets placed in a MAPT are shielded from estate recovery. The major limitation: assets must be transferred at least five years before applying for Medicaid due to the look-back period. Anyone already receiving Medicaid or within five years of application cannot use this strategy for those assets.
2. Lady Bird Deed (Enhanced Life Estate Deed)
A Lady Bird deed allows a homeowner to retain full control of their property during their lifetime, including the right to sell or mortgage it, while naming a beneficiary who automatically inherits the property at death outside of probate. This avoids estate recovery in probate-only states because the home never passes through the estate.
Lady Bird deeds are only legally recognized in five states: Florida, Michigan, Texas, Vermont, and West Virginia.
3. Transfer on Death Deeds
Similar in effect to a Lady Bird deed, TOD deeds are available in more states (currently around 30 states) and allow real property to pass directly to a named beneficiary at death without going through probate. In probate-only recovery states, this effectively protects the home.
4. Spousal Planning
Transfers between spouses are generally exempt from Medicaid transfer penalties. Assets held solely by a community spouse are not subject to estate recovery while that spouse is alive. However, after the community spouse dies, any assets remaining in their estate may be subject to a claim if the institutionalized spouse received Medicaid. Proper titling and trust planning can address this.
5. Caregiver Child Exemption
In many states, a Medicaid recipient can transfer their home to an adult child who has lived there and provided care for at least two years before the parent entered a nursing home. This transfer is generally exempt from the look-back period. The home then passes outside the estate, avoiding recovery.
6. Keep Assets Out of Probate
In probate-only recovery states, the simplest strategy is ensuring assets do not pass through the probate estate. This means properly titling accounts with TOD or POD designations, using beneficiary designations on retirement accounts and life insurance, holding property in joint tenancy with right of survivorship, or using a living trust.
The Look-Back Period and Timing
Medicaid has a 60-month (five-year) look-back period for long-term care benefits. During this review, any assets transferred for less than fair market value are counted as a disqualifying transfer, resulting in a penalty period during which Medicaid will not cover nursing home costs.
This means timing matters enormously. Strategies involving trusts or property transfers must be executed well before the need for long-term care arises. Waiting until someone is already in a nursing home or applying for Medicaid eliminates most planning options.
What Happens After the Medicaid Recipient Dies
When a Medicaid recipient dies, the state typically receives notice through the probate process or through a state monitoring system. The state then has a window to file a claim, which varies by state but is often around one year from the date of death or from the opening of the estate, whichever is later.
The estate executor or administrator is responsible for notifying the state and cannot distribute assets to heirs until the Medicaid claim is resolved or waived. Distributing assets before the claim is settled can create personal liability for the executor.
If the estate does not have enough assets to cover the claim, the state receives what is available and cannot pursue heirs personally for the remaining balance. Medicaid estate recovery only reaches estate assets, not the personal assets of family members.
What Changed and What to Watch in 2026
No major federal legislative changes to Medicaid estate recovery took effect in 2026. Congress considered H.R. 7573 in 2024, which would have repealed the federal mandate for states to operate estate recovery programs, but the bill did not advance.
At the state level:
- California reinstated an asset limit of $130,000 for individuals and $195,000 for couples in 2026, which changes planning considerations for Medi-Cal recipients
- Massachusetts continues operating under its August 2024 narrowed recovery rules, limiting claims to long-term care costs for those 55 and older
- Advocates continue pushing for broader exemptions in multiple states, particularly for home equity and family farms
Families should also note that Medicaid rules affecting eligibility, spend-down thresholds, and community spouse resource allowances update annually with inflation. The community spouse resource allowance (CSRA) for 2025 was set at a maximum of $157,920, protecting that amount for the spouse remaining at home.
Check Your Eligibility for Medicaid and Related Benefits
If you or a family member may need Medicaid long-term care coverage, understanding estate recovery is only one piece of the picture. Eligibility rules, income limits, and asset thresholds vary by state and change each year.
Use the Benefits Navigator screener to check what programs you or your family may qualify for across all 50 states. The tool is free and checks Medicaid, Medicare Savings Programs, SNAP, and more than a dozen other federal and state assistance programs at once.
Frequently Asked Questions
Does Medicaid estate recovery apply to everyone who receives Medicaid?
No. Federal law only requires estate recovery for individuals age 55 or older who received Medicaid coverage for nursing facility services, home and community-based services, or related long-term care. Medicaid recipients under 55 are not subject to estate recovery unless they were permanently institutionalized.
Can Medicaid take my home while I am still alive?
No. Medicaid cannot seize your home during your lifetime. However, the state may place a lien on the property, which must be paid when the home is sold. Certain conditions prevent even a lien from being placed, such as a spouse or dependent child living in the home.
What if my estate has no assets?
If the deceased Medicaid recipient's estate has no assets to recover, the state receives nothing. Medicaid estate recovery cannot extend to the personal assets of heirs or family members. Recovery is limited to what is in the estate.
Can I give away my assets to avoid Medicaid estate recovery?
Transferring assets to avoid Medicaid recovery must be done carefully and well in advance. Gifts made within five years of applying for Medicaid long-term care can trigger a penalty period. Proper planning with an elder law attorney is necessary to do this correctly.
What is an undue hardship waiver and how do I apply?
An undue hardship waiver is a request to the state Medicaid agency to forgive or reduce the estate recovery claim based on the financial impact on surviving family members. Each state has its own definition of hardship and its own application deadline. You typically must apply within 30 to 90 days of receiving the state's recovery notice. Contact your state Medicaid office or an elder law attorney for the specific process in your state.
Are retirement accounts protected from Medicaid estate recovery?
In most cases, retirement accounts (IRAs, 401(k)s) with a named beneficiary pass outside of probate and are therefore protected in probate-only states. In expanded recovery states, the rules are more complicated and may include non-probate assets. Check your specific state's rules.
Does Medicaid estate recovery affect the community spouse?
The state cannot file an estate recovery claim while the community spouse is still alive. After the community spouse dies, assets remaining in the spouse's estate may be subject to recovery if the institutionalized spouse previously received Medicaid. Planning the titling of assets and use of trusts while both spouses are alive is the best way to address this.
What is the difference between a Medicaid lien and estate recovery?
A Medicaid lien is placed on property while the recipient is still alive, often on real estate. A lien does not force a sale during the recipient's lifetime but must be paid when the property is sold or transferred. Estate recovery, by contrast, occurs after death and is a claim filed against the deceased's estate in the probate process. Both serve the same ultimate purpose: reimbursing the state for Medicaid costs.
