Many families believe that if their loved one moves into a Medicaid-funded nursing home, they will immediately have to forfeit their home to the state. However, this belief is inaccurate. Medicaid simply does not take homes from living applicants or beneficiaries. What can happen is the home might make an applicant ineligible for Medicaid, or it might cause an existing beneficiary to lose their benefits, if it doesn’t meet, or stops meeting, any of Medicaid’s home exemption rules.

The more common scenario is that a family may decide that selling their home is the best way to pay for long-term care, but they will make this decision on their own without any coercion or direction from the state. After a Medicaid beneficiary dies, however, the state could force the sale of the home in some circumstances, but with planning there are ways to prevent this.

When Homes Are Protected for Medicaid Applicants and Beneficiaries

Medicaid will not take or force the sale of any applicant or beneficiary’s home while they are living. In many cases, the primary home is exempt from Medicaid’s asset limit, so it won’t prevent an applicant from being accepted, and it won’t impact a beneficiary’s eligibility once they are enrolled, as detailed in some of the example scenarios below. These examples will explain why the home is protected if the Medicaid beneficiary’s spouse is living there, when the home is exempt for single beneficiaries, what Medicaid Planning strategies protect homes and more.

When it comes to home ownership and Medicaid, the worst case scenario during a senior’s lifetime is that their home could make them ineligible for Medicaid. This would result in their application being denied, or, if they’re already enrolled in Medicaid (and something changed with their home, finances or marital situation to change the exempt status of the home), they would lose their Medicaid eligibility and face a gap in coverage. These situations will also be addressed in the following examples.

When Homes Are Not Protected for Medicaid Beneficiaries

After a Medicaid beneficiary passes away, states are legally obligated to try and collect reimbursement for the long-term care expenses they paid for via Medicaid during the beneficiary’s life. This is known as Medicaid Estate Recovery. Every state attempts to collect through the deceased beneficiary’s estate when it goes through the probate process, and some states, known as “expanded recovery” states, will also try to collect outside of probate. States that only attempt recover during probate are known as “probate only.”

For Medicaid beneficiaries who were homeowners, the home is often the most valuable asset in their estate. If their other assets cannot pay back the state in full for their Medicaid expenses, the state can force the sale of the home in order to collect the full amount. However, there are certain scenarios and strategies that can protect the home from estate recovery, which are explained below.

Example Scenarios

We will explain how each of the following situations impacts the home’s status as a countable or exempt asset in the context of Medicaid’s asset limit, and how the scenario protects or doesn’t protect the home from Medicaid Estate Recovery. These are the most common scenarios seniors who need Medicaid might find themselves facing, but if a senior or their family is in a situation that doesn’t match with any of these examples, they should contact our team of professionals.

Single Beneficiary Living at Home

If a senior lives at home and is going to receive their Medicaid long-term care benefits via a Home and Community Based Services (HCBS) Waiver, the home is exempt from the asset limit as long as the applicant meets their state’s home equity interest limit, which is $752,000 in most states in 2026, $1,130,000 in states with higher property values and there is no limit in California. Home equity interest is the percentage of the home’s value the senior owns minus any outstanding debt on the home, like a mortgage. If the senior lives at home and receives their long-term care via Aged, Blind and Disabled (ABD) Medicaid, the home is exempt regardless of the senior’s equity interest because the home equity interest limit does not apply to ABD Medicaid.

After a senior in this situation passes away, their home will not be protected from Medicaid Estate Recovery, unless they have used a Medicaid Asset Protection Trust, a Lady Bird Deed, or their heirs can claim undue hardship, which are all discussed next.

Home is in a Medicaid Asset Protection Trust

Any asset placed in a Medicaid Asset Protection Trust (MAPT) is both exempt from the asset limit and protected from Medicaid Estate Recovery. However, creating a MAPT violates the Look-Back Period, which is five years long in most states so in order for a MAPT to be an effective Medicaid Planning tool it needs to be created at least five years before the senior intends to apply. MAPTs are also expensive to create, so they are only recommended for people who have more than $100,000 in liquid assets.

Homeowner Used a Lady Bird Deed

Lady Bird Deeds transfer ownership of a home directly to the individual named in the deed immediately after the homeowner’s death, which means the home avoids probate. This also protects the home from Medicaid Estate Recovery in the five states where Lady Bird Deeds are allowed – Texas, Florida, Michigan, West Virginia and Vermont. However, it’s important to note that Lady Bird Deeds do not make homes exempt from Medicaid’s asset limit.

Undue Hardship

States may choose not to force the sale of a home for Medicaid Estate Recovery purposes if the sale would cause “undue hardship” on the people who are designated to inherit the home. This might happen if the heirs are living in the home and there is no reasonable expectation that they will be able to find or afford a different living situation that will not jeopardize their safety or health. Or if the home is an essential part of a business that supports the heirs, the state could grant an undue hardship waiver and not attempt recovery via the home.

Single Beneficiary in Nursing Home

If a single senior homeowner Medicaid beneficiary moves into a nursing home, their home can still be exempt from the asset limit if they file an “intent to return” form with the state. This is a document that asserts the senior still considers the home their primary residence and they intend to move back there if and when their health allows.

“Intent to return” rules can vary by state, but in most states, seniors are allowed to use these documents even if there is no reasonable expectation that they will become healthy enough to return home. However, there is a time limit on how long these statements can remain in effect in most states. When that limit is reached, the empty home of a single beneficiary with Nursing Home Medicaid will most likely be counted toward the asset limit, so the beneficiary will lose their coverage. At that point, they will probably need to sell their house and use the profits to pay for their long-term care, but that will be up to them and their family, the state Medicaid offices will not force the sale.

It should be noted that intent to return, and all of Medicaid’s home exemption rules, only apply to primary homes. Second homes or vacation homes are always counted toward the asset limit.

Spouse or Qualifying Child Lives in the Home

If a Medicaid applicant or beneficiary’s spouse, minor child (under age 21 in most states), or disabled child of any age lives in the home, it is exempt from Medicaid’s asset limit and it is protected from Medicaid Estate Recovery. This is true no matter where the applicant/beneficiary lives, if they are alive, or what their home equity interest is. So, if the Medicaid beneficiary moves into a nursing home or memory care, but their spouse or qualifying child lives in the family’s primary home, the home will be exempt from the asset limit and it will be safe from recovery, even after the beneficiary in the nursing home or memory care passes away.

If the spouse dies before the Medicaid beneficiary, or if the qualifying child moves out or passes away, the Medicaid beneficiary would, essentially, be in the “Single Beneficiary Moves to Nursing Home” situation described above. So, if they file an intent to return home, their home will likely be exempt for at least some period of time, which will give them or their family a chance to decide what to do with the home. And they may have to sell the home in order to pay for care because the home makes the senior ineligible for Medicaid coverage.

It should be noted that this scenario assumes the spouse is not a Medicaid beneficiary themselves. If they are, both spouses have to follow all of the same homeownership rules.

Child Caregiver and Sibling Exemptions

If a Medicaid applicant has used the Child Caregiver Exemption or Sibling Exemption, the home is exempt from the asset limit and Medicaid Estate Recovery.

The Child Caregiver Exemption allows a Medicaid applicant to transfer ownership of their home to a qualified adult child without violating the Look-Back Period. The adult child is qualified if they are biological or adopted (step or foster children are not eligible), they have lived in the home for at least two years prior to their parent receiving Medicaid long-term care, and during that time they provided their parent with care that prevented the need for Medicaid coverage.

The Sibling Exemption lets Medicaid applicants transfer their home to a qualified sibling without violating the Look-Back Period. The sibling is qualified if they are biological or adopted, if they have lived in the home for at least one year prior to their sibling receiving Medicaid benefits, and they have an equity interest in the home (they are a co-owner).

Long-Term Care Partnership Programs

These partnership programs can help protect some of a Medicaid applicant’s assets, including their home, from the asset limit and from Medicaid Estate Recovery. Individuals buy these policies when they are still healthy, and then when they need long-term care the insurance will kick in and cover their long-term care costs up to a certain predetermined amount. This predetermined amount is the same total that will be exempt from the senior’s Medicaid asset limit for eligibility, and the same amount that will be protected from Medicaid Estate Recovery. If/when the policy pays out the full amount, Medicaid will then take over the payments for long-term care, ensuring the senior has no gaps in coverage.

So, if a senior purchases a policy that pays out $500,000 for long-term care, and their home is worth $500,000 or less, their home can be completely exempt from the asset limit and protected from estate recovery.