Montana Medicaid Estate Recovery and Probate: What Executors Must Know

Montana's Medicaid Estate Recovery Program (MERP) is the single most significant hidden liability in Montana probate administration. The program allows the state to seek reimbursement for Medicaid-funded long-term care costs from the decedent's estate — and following a December 2025 Montana Supreme Court ruling, can pursue heirs personally even after probate has closed and the creditor claim window has expired. Executors who distribute assets without first resolving Medicaid exposure risk facing personal claims and post-probate lawsuits.

What Medicaid Estate Recovery Is

When a Montana resident over age 55 receives Medicaid-funded long-term care — including nursing home care, home and community-based services, or other qualifying care — the Montana Department of Public Health and Human Services (DPHHS) is federally mandated to seek reimbursement for those costs from the person's estate after death.

Montana is an "expanded recovery" state. This means DPHHS does not limit recovery to the probate estate. The state can pursue:

• Assets passing through informal or formal probate
• Property held in joint tenancy with right of survivorship
• Living trusts
• Life estates
• Property transferred via Transfer on Death (TOD) deeds
• Real estate liens placed on nursing home residents' properties while they are alive

This broad scope means that even if you carefully structured the estate to pass assets outside of probate, DPHHS may still have a claim.

The DPHHS v. Johnson Ruling (2025): Why Timing Matters More Than Ever

Before December 2025, many Montana executors and estate attorneys operated under the assumption that DPHHS faced the same four-month creditor claim deadline as all other creditors. Once that window closed, the thinking went, the state's claim was forever barred and assets could be safely distributed.

The Montana Supreme Court's ruling in Montana Department of Public Health and Human Services v. Johnson (2025 MT 276, decided December 2, 2025) overturned this assumption definitively.

The case involved Florence Pound, a Medicaid recipient who died intestate. Her daughter, Minta Johnson, initiated informal probate, properly published the Notice to Creditors, and the four-month deadline expired. DPHHS filed its claim for $5,360.89 one day late. The probate court rejected the claim as untimely and closed the estate. Johnson distributed the primary asset — a home that sold for $200,000 — to herself as the sole heir.

DPHHS then filed a separate civil lawsuit against Johnson personally under MCA § 53-6-167(2), seeking recovery from Johnson directly as someone who had received the decedent's property by distribution. The District Court initially dismissed this lawsuit, finding that the closed probate and expired creditor deadline barred the state's claim.

The Montana Supreme Court reversed. The Court held that MCA § 53-6-167 creates two independent recovery tracks:

• Subsection (1): Claims against the probate estate itself — subject to the four-month deadline
• Subsection (2): Claims against heirs or transferees who received the decedent's property — this track is independent and survives the closing of the estate

The state only needs to prove that the decedent received recoverable Medicaid assistance, that the defendant received the decedent's property, and that the value of the property supports the claim. Distributing assets does not extinguish the state's right to pursue the heir directly.

The practical implication: Closing probate and passing the four-month creditor window does not protect heirs from DPHHS recovery if the decedent was a Medicaid recipient. The state can come back after the fact.

What This Means for Executors

If the decedent received Medicaid-funded long-term care after age 55, treat DPHHS as a creditor who must be resolved before any assets are distributed — regardless of whether DPHHS formally filed a claim in the probate.

Do not wait for DPHHS to come to you. Contact the Montana Department of Public Health and Human Services Medicaid Estate Recovery Program proactively to determine whether the state has a claim and what the claimed amount is. The contact point is the DPHHS Office of Fair Hearings (Helena).

The statutory order of payment under MCA § 72-3-807 places Medicaid estate recovery claims above general unsecured creditors and equal in priority to other government debts. Paying general creditors (credit cards, utilities, other bills) before resolving a DPHHS Medicaid claim is a breach of fiduciary duty and creates personal liability for the executor.

Statutory Exemptions From Medicaid Recovery

Montana law and administrative rules recognize specific circumstances where DPHHS cannot pursue recovery, or must delay it:

Surviving spouse. DPHHS cannot pursue recovery while the decedent's surviving spouse is alive. Recovery is deferred until the surviving spouse also dies.

Surviving minor child. If the decedent has a surviving minor child (under 21), recovery is deferred until the child reaches adulthood.

Surviving blind or disabled child. If the decedent has a surviving child who is blind or permanently and totally disabled as defined under SSI criteria, recovery is deferred indefinitely.

Undue hardship. DPHHS may waive or reduce recovery if the heir can demonstrate that recovery would result in "undue hardship." The Administrative Rules of Montana (ARM 37.82.431) define undue hardship criteria, which typically involve situations where the estate is a primary income-producing asset for the heir, or where recovery would deprive the heir of minimal income needed for food, clothing, shelter, and medical care.

These exemptions are not automatic. The heir must assert them — either during the probate process or in response to a DPHHS claim or lawsuit. If you believe an exemption applies, consult an attorney before distributing assets, as the exemption request process has specific procedural requirements.

Medicaid Liens on Real Property

DPHHS has the authority to place real property liens on the estates of Medicaid recipients who are considered permanently institutionalized (i.e., in a nursing home long-term). This lien is recorded against the property and must be resolved before a clear title can be transferred.

If the decedent lived in a nursing home funded by Medicaid and owned a home, search for a DPHHS lien at the County Clerk and Recorder's office in the county where the property is located. Title companies will flag this during a real estate transaction, but by that point the estate is already in a complicated position if the lien has not been addressed.

A recorded DPHHS lien does not automatically mean you owe the full amount of the lien. DPHHS must prove the actual amount of recoverable medical assistance provided. The claimed amount can be challenged if it includes non-covered services or errors. An attorney experienced in Medicaid estate recovery negotiations is essential for this.

Transfer on Death Deeds Do Not Shield Property From Recovery

A common misconception is that placing a Transfer on Death deed on real property before death will protect it from Medicaid recovery. This is incorrect in Montana.

Montana explicitly includes TOD deed transfers in its expanded recovery base. A TOD beneficiary who receives property from a Medicaid recipient is subject to DPHHS claims under MCA § 72-6-112 (creditor liability of non-probate transferees) and directly under the Johnson ruling's interpretation of MCA § 53-6-167.

TOD deeds are useful for avoiding probate costs and complexity. They do not avoid Medicaid estate recovery.

How to Handle Medicaid Recovery as an Executor

Step 1: Determine whether DPHHS has a claim. Contact DPHHS early in the administration process. Ask directly whether the decedent was a Medicaid recipient who received long-term care services. DPHHS maintains records of all covered individuals.

Step 2: Request the itemized claim. If DPHHS has a claim, request the itemized statement of recoverable medical assistance. Verify that the claimed services match Montana's covered services under the Medicaid statute. Errors in DPHHS claims do occur.

Step 3: Determine whether an exemption applies. Check whether a surviving spouse, minor child, or blind/disabled child exemption applies. If so, DPHHS cannot currently recover — document this exemption formally.

If no automatic exemption applies, assess whether an undue hardship claim is viable under ARM 37.82.431.

Step 4: Do not distribute assets until the Medicaid question is resolved. Following Johnson, distributing assets before resolving a DPHHS claim puts both the executor and the heirs at risk. The estate, and potentially the individual heirs, can be pursued directly.

Step 5: Negotiate or pay the claim. DPHHS claims can sometimes be negotiated, particularly if the estate does not have sufficient assets to pay the full claimed amount. An attorney is valuable here. DPHHS has administrative procedures for negotiated settlements.

When to Hire an Attorney for Medicaid Recovery

Medicaid estate recovery is one of the situations where legal counsel is strongly advisable even for otherwise simple estates:

• When the DPHHS claim is large relative to the estate's value
• When you believe an exemption applies and need to formally assert it
• When DPHHS has recorded a property lien that must be released before real estate can be sold
• When DPHHS missed the probate creditor deadline but is now pursuing heirs directly under MCA § 53-6-167(2)
• When the estate is insolvent and Medicaid recovery competes with other creditor claims

Who This Is For

• Executors of estates where the decedent lived in a nursing home or received in-home Medicaid care
• Heirs who received a decedent's property and are now facing a DPHHS recovery claim
• Surviving spouses who want to understand when Medicaid recovery can and cannot be pursued
• Any executor trying to understand the creditor payment order before distributing assets

Who This Is NOT For

• Estates where the decedent never received Medicaid-funded long-term care — MERP does not apply and standard probate administration is all that is required
• Situations where a clear exemption applies (surviving spouse, minor or disabled child) — in these cases the process is simpler, though it still requires formally documenting the exemption

FAQ

Does Montana Medicaid recovery apply to all Medicaid recipients? No. Montana's Medicaid Estate Recovery Program specifically targets individuals aged 55 or older who received Medicaid-funded long-term care services, including nursing facility services, home and community-based care, and related hospital and prescription drug services while receiving long-term care. Standard Medicaid services (like basic healthcare) for younger individuals are generally not subject to recovery.

How does DPHHS know if the decedent was a Medicaid recipient? DPHHS maintains records of all Medicaid enrollees and services provided. When a death is reported to DPHHS, they cross-reference their records. Executors proactively contacting DPHHS early will receive faster confirmation of whether a claim exists.

What is the difference between a Medicaid lien and a Medicaid recovery claim? A Medicaid lien is recorded against specific real property before death (typically while the person is institutionalized) and must be released before the property can be transferred. A Medicaid recovery claim is filed after death against the estate or heirs for the cost of care provided. Both can apply to the same estate.

Can DPHHS take the family home? DPHHS can seek recovery from the estate, which can include the family home if it is a probate or non-probate asset. However, recovery cannot proceed while a surviving spouse lives in the home, or if the home is the primary residence of a surviving blind or disabled child. An undue hardship exemption may also apply if the heir depends on the home for income (e.g., as a family farm). These exemptions must be actively asserted.

What if we already distributed the assets before learning about the Medicaid claim? Following DPHHS v. Johnson, this creates direct liability for the heir who received the property. DPHHS can file a civil lawsuit directly against the heir for the value of the Medicaid assistance up to the value of the property received. Consult an attorney immediately if you are in this situation.

The Montana Probate Process Guide covers the Medicaid Estate Recovery Defense section in detail — including the DPHHS notification process, the exemption checklist, the creditor priority hierarchy under MCA § 72-3-807, and the specific actions to take before distributing any estate assets when Medicaid exposure is possible.

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