Many families are blindsided after the death of a loved one who received Medicaid long-term care. The state can demand repayment from the deceased's estate under a program called Medicaid Estate Recovery (MERP). This article explains how it works, what protections exist, and how to plan ahead.
What the State Can Recover
After a Medicaid recipient age 55 or older passes away, states are federally required to try to recover costs paid for nursing home care, home- and community-based services, and related hospital and prescription drug expenses. Recovery can include the person's home, bank accounts, stocks, and other assets that would go through probate. Some states also go after non-probate assets like jointly owned property or living trusts.
Four Key Protections
- Surviving Spouse – The state cannot recover from the estate while a surviving spouse is alive. The home is protected as long as the spouse lives there.
- Minor or Disabled Children – If a child is under 21 or permanently disabled, recovery is deferred until after they die or no longer qualify.
- Sibling with Equity Interest – A sibling who lived in the home for at least one year before the recipient's death and who already had an ownership stake can block recovery.
- Caregiver Child – An adult child who lived in the home for at least two years before the recipient's death and provided care that delayed nursing home placement may also qualify for a deferral.
Hardship Waivers
Every state must offer hardship waivers. Common grounds: the home is the sole income-producing asset (e.g., a farm), its sale would cause the heirs to become eligible for public assistance, or the estate is too small to cover funeral expenses. Waiver availability and terms vary widely.
Strategies to Protect Your Home
- Transfer the home to a spouse or a trust that meets Medicaid rules at least five years before applying for Medicaid.
- Use a life estate or transfer-on-death deed in states that allow them (34 states currently).
- Irrevocable trust can shield the home if properly structured and funded early.
What to Do Now
Consult an elder law attorney experienced in your state's Medicaid rules. Planning early—years before you might need long-term care—gives you the most options. The 5-year lookback period means transfers made within five years of a Medicaid application can trigger penalties.
Key takeaway: Medicaid estate recovery is real, but with careful planning, you can often protect your home for your heirs. Don't wait until it's too late.