Medicaid Liens on Property and Anti-Lien Protections

Federal law generally bars Medicaid liens on property while the recipient is alive, with one significant exception for people permanently living in a nursing facility, and requires every state to seek repayment from the deceased recipient’s estate after death. A set of family-member protections can block both the lifetime lien and the after-death claim on the home.

The Lifetime Rule: No Lien While You’re Alive

Under 42 U.S.C. § 1396p(a)(1), no lien may be placed against anyone’s property during their lifetime on account of Medicaid benefits paid on their behalf.¹ Receiving Medicaid coverage does not, by itself, give the state a claim on your home, car, or other assets while you’re alive and using them.

Two exceptions break through. A court can order a lien if Medicaid benefits were paid incorrectly. And a state can place a TEFRA lien on the home of someone permanently institutionalized who is not expected to return. Every other Medicaid claim on your property has to wait until you die.

TEFRA Liens on the Home of a Permanent Nursing Home Resident

The TEFRA lien, named for the Tax Equity and Fiscal Responsibility Act that authorized it, applies only to the real property of a Medicaid recipient who is an inpatient in a nursing facility or other medical institution and cannot reasonably be expected to return home.² The state makes that determination based on a physician’s assessment of the resident’s medical prognosis and functional abilities.

Once attached, the lien clouds the title. If the home is sold, the state collects from the proceeds to reimburse the cost of nursing facility care, and in states that elect broader recovery, other Medicaid services provided before institutionalization.³

A TEFRA lien is not permanent. If the recipient is discharged and returns home, the state must remove the lien.¹ Someone recovering from a temporary stay keeps the full protection of the lifetime anti-lien rule.

Family Members Whose Residence Blocks a TEFRA Lien

Even for a permanently institutionalized recipient, a TEFRA lien cannot be placed on the home if any of the following people lawfully live there:⁴

The recipient’s spouse.
A child under 21.
A child of any age who is blind or has a permanent disability.
A sibling who holds an equity interest in the home and has lived there for at least one year immediately before the recipient entered the institution.

These protections are absolute when the conditions are met, regardless of how much Medicaid has paid out. The state has no discretion to override them. Someone moving into the home after the lien is already in place may not get the same retroactive protection, so families should document residency from the start.

Estate Recovery After Death

After a Medicaid recipient dies, federal law requires every state to run a Medicaid Estate Recovery Program that seeks repayment from the deceased person’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug costs incurred after age 55.⁴ States may also elect to recover the cost of other Medicaid services.

The state’s claim is capped at what Medicaid actually spent. If Medicaid paid $120,000 and the estate is worth $250,000, recovery stops at $120,000. The estate also caps recovery from the other direction: if Medicaid paid $200,000 but the estate is worth $80,000, the state gets $80,000 and no more. Heirs are not personally liable for any shortfall.

Many states also apply a cost-effectiveness threshold and won’t pursue estates that are too small. About 19 states report having no meaningful minimum. Others set thresholds ranging from $100 to $500, and a few set much higher floors.⁵

What Counts as the Estate

Every state must at minimum recover from the probate estate, meaning property that passes through probate court after death. But federal law lets states adopt an expanded definition that reaches any asset the deceased had a legal interest in at the moment of death, including property held in joint tenancy, tenancy in common, life estates, living trusts, and survivorship arrangements.¹

Roughly half the states use some version of the expanded definition. In those states, moving a home into a living trust or adding an adult child as a joint owner does not, by itself, put the property out of Medicaid’s reach after death. The common assumption that avoiding probate avoids estate recovery is often wrong.

Who Is Protected From Estate Recovery

The family-member protections that block a TEFRA lien also delay or prevent estate recovery, with one important addition. Recovery cannot begin while the surviving spouse is alive. The estate stays untouchable until the spouse dies.⁴

Beyond the spouse, recovery from the home is blocked while any of these people lawfully live there:

A child under 21, or a child of any age who is blind or permanently disabled.
A caregiver child: a son or daughter who lived in the recipient’s home for at least two years immediately before institutionalization and provided care that allowed the parent to stay home longer than they otherwise could have. This exemption applies only to estate recovery, not to TEFRA liens.

The caregiver child exemption is powerful but demanding to prove. The child must show continuous residence for the full two years and demonstrate that the care genuinely delayed nursing home placement. States typically require a physician’s statement confirming the parent needed help with daily activities and that the child provided it. Daily care logs, proof that the child’s address matched the parent’s home, and affidavits from people who witnessed the arrangement all strengthen the claim. If the child worked full-time outside the home during those two years, the state may want evidence of supplemental care from home health aides or adult day programs.

The Home Equity Limit

Separate from any lien, Medicaid imposes a home equity limit that governs whether an applicant can qualify for long-term care coverage in the first place. For 2025, the federally set minimum equity limit is $730,000 and the maximum is $1,097,000; each state picks a figure in that range, and the limits adjust annually for inflation. If your equity exceeds your state’s chosen limit, you’re ineligible for Medicaid nursing facility coverage unless a spouse, minor child, or blind or disabled child lives in the home. This rule doesn’t create a lien. It disqualifies the applicant.

Transferring the Home Before Applying

Families sometimes try to protect the home by giving it away before applying for Medicaid. Federal law anticipates this with a 60-month look-back. When someone applies for nursing home Medicaid, the state reviews five years of financial records for assets given away or sold below fair market value.¹

A below-market transfer inside that window triggers a penalty period during which Medicaid will not pay for nursing home care. The penalty is calculated by dividing the uncompensated value of the transfer by the average monthly cost of private-pay nursing care in the state. There is no maximum penalty length. And the clock doesn’t start on the day of the transfer; it starts only once the applicant is in a nursing facility, has applied for Medicaid, and is otherwise eligible. That timing is what makes late-in-life transfers so risky, because the penalty period lands exactly when the family has already spent down other resources.

Federal law does exempt several transfers from the penalty:¹

Transfer to a spouse, or to someone else for the sole benefit of the spouse.
Transfer to a blind or permanently disabled child of any age.
Transfer to a sibling with an equity interest in the home who lived there for at least one year before the applicant entered a nursing facility.
Transfer to a caregiver child meeting the two-year residence and delayed-placement standard.

The penalty can also be waived if the applicant shows the transfer had nothing to do with qualifying for Medicaid, if the transferred assets are returned, or if denying coverage would cause undue hardship.

Hardship Waivers

When no automatic exemption applies, heirs still have one route: the undue hardship waiver. Federal law requires every state to have a process for waiving recovery when the claim would cause genuine hardship, but leaves “undue hardship” undefined, so criteria vary widely.⁴

The most common basis, recognized by roughly 40 states, is that the property is the heir’s primary means of earning a living, such as a working farm or family business. About 20 states also grant relief where recovery would push the heir onto public assistance. Some states will negotiate partial recovery when income is very low but doesn’t meet the full waiver standard.⁶

Deadlines are short. Application windows range from as few as 20 days to 60 or 90 days after the heir receives notice of the claim. Miss it and the right to request a waiver is generally forfeited. The application requires documentation of income, assets, expenses, and the specific hardship recovery would cause.

Notice and Your Right to Respond

States cannot pursue estate recovery without notifying affected survivors. Federal law requires states to inform Medicaid applicants about the recovery program at the initial application and at each annual redetermination, so the recipient should be aware of it long before death.⁶ After death, the state must notify heirs or the estate representative that recovery is being initiated and give them an opportunity to claim an exemption or hardship waiver.

How that notice arrives varies. Some states file a claim in probate court and the personal representative receives formal legal papers; others send a letter directly to known heirs. The notice should identify the amount sought, the basis for the claim, the deadline for asserting an exemption or requesting a waiver, and any appeal rights. If a statutory protection applies to you, because a spouse, disabled child, or qualifying caregiver child lives in the home, respond in writing before the deadline and attach supporting documentation. Silence is treated as acceptance.

The procedural details are state-specific, but the core rights are federal: notice, a chance to assert exemptions, and a hardship waiver process. A state that skips those steps has given you grounds to contest the claim.

1
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
2
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
3
Centers for Medicare and Medicaid Services. State Medicaid Manual – Transmittal 75
4
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
5
Medicaid and CHIP Payment and Access Commission. Medicaid Estate Recovery: Improving Policy and Promoting Equity
6
U.S. Department of Health and Human Services. Medicaid Estate Recovery