How Can We Protect Mother-in-Law’s House from Medicaid Estate Recovery?

 In Long-Term Care Planning
Medicaid estate recovery

Photo by Georg Arthur Pflueger on Unsplash


My mother-in-law lives on her own but requires my wife to visit regularly to help her with paying bills, groceries, medication, etc. She is on Medicare with Medicaid picking up some things like prescription costs. She owns her home and is wondering if there is any way to save it from Medicaid estate recovery. I have done a lot of research with many differing opinions. She does not require full care today. However, she is 84 years young. Is there anything we can do to allow her to leave the home to her children?


To some extent the answer depends on your state rules and practices, but the general rules apply nationwide. This is because of the the nature of Medicaid as a joint federal-state program. Each state has its own Medicaid program (some states using different names for it such as MediCal, MassHealth and TennCare), but all must fall under the same federal rules in order to receive a substantial federal contribution to the Medicaid costs. Under those federal rules, every state must have an estate recovery program under which it seeks reimbursement for its costs from the estates of deceased recipients. The main difference among the state programs is whether they seek recovery only against the beneficiary’s probate estate — property in their sole name — or also against non-probate property — such as jointly owned property or accounts with designated beneficiaries.

The other major rule of Medicaid is that the states must penalize transfers of assets with a period of ineligibility for benefits of up to five years following the transfer. Here again, the states differ with some only penalizing transfers if the individual is seeking Medicaid coverage of nursing home care and others penalizing any transfer.

Life Estate vs. Irrevocable Trust

With all that said, the usual techniques for protecting homes from estate recovery are to transfer them to a life estate or an irrevocable trust. A life estate is a form of joint ownership where the “life tenant” has the right to live in and control the property for life and the “remaindermen” take over upon the death of the life tenant. This avoids probate and in most states avoids estate recovery.

An irrevocable trust achieves the same results but is a bit more complex. The main advantage of an irrevocable trust over a life estate is that it would also protect the proceeds if the house were sold during the Medicaid beneficiary’s life.

Medicaid Transfer Penalty

The problem with both strategies is that they could cause your mother-in-law to be ineligible for Medicaid for up to five years following the transfer. As is mentioned above, this “penalty” may only apply to Medicaid coverage of nursing home care and not to the Medicaid coverage she is receiving now, though that can differ from state to state. This is where a life estate can have an advantage over an irrevocable trust because it can be reversed. Your mother-in-law could create the life estate by executing a deed now. If she were then to need to go to a nursing home during the subsequent five years, her children could transfer back their interest in the house to her. They would then lose the estate recovery protection, but the five-year transfer penalty would disappear.

There are also some exceptions to the transfer penalty. One involves transfer to trust for the sole benefit of a disabled individual under the age of 65. So, if any of your mother-in-law’s children or grandchildren is disabled, she could protect the house by transferring it into trust for their benefit. This would protect the house, but also would mean that its benefit would not be equally shared by all her children.

As you can see, this already complex field is made more difficult due to different state applications of federal law. I recommend that your mother-in-law’s family consult with a local elder law attorney. You can find one at

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