Nebraska Medicaid Estate Recovery: What DHHS Can Claim and How to Respond

Most heirs and Personal Representatives understand that the decedent's debts must be paid before they can inherit anything. Medicaid estate recovery is a specific version of that principle — but Nebraska's version is unusually aggressive. Under legislation passed in 2017, the Nebraska Department of Health and Human Services can pursue recovery not just from the probate estate, but from assets that bypassed probate entirely.

If the person who died received Medicaid after age 55 — most commonly for nursing facility care — DHHS may have a claim against the estate. Distributing assets before resolving that claim can expose the Personal Representative (and even the beneficiaries) to personal liability.

What Nebraska's Medicaid Estate Recovery Program Does

When a Nebraska Medicaid recipient over 55 dies, DHHS has the legal authority to file a claim in the estate for the cost of medical assistance provided during the recipient's lifetime. This most commonly involves nursing home care, home health care, or other long-term care services.

The purpose is to reimburse the state and federal governments (Medicaid is jointly funded) for benefits that were means-tested — intended for people with limited assets. Estate recovery is how those funds are partially recouped after the recipient's death.

Nebraska's recovery program applies to both:

• The formal probate estate (assets titled in the decedent's name alone that pass through the county court)
• Non-probate assets — this is where Nebraska's law is distinctively broad

LB 268: The Expanded Recovery Regime

Legislative Bill 268 (2017) dramatically expanded what DHHS can pursue. Before LB 268, Nebraska could only recover from the formal probate estate. After LB 268, the definition of recoverable "estate" was extended to include virtually any asset in which the decedent held a legal title or economic interest at the time of death, regardless of whether that asset passes through probate.

Non-probate assets now subject to Medicaid recovery in Nebraska include:

• Property held in joint tenancy (DHHS can claim the decedent's share)
• Transfer on Death deed property (the home that passed directly to a child via TOD deed can still be subject to a DHHS claim)
• Assets held in living trusts (revocable trusts receive no protection)
• Remainder interests and life estates in real property
• TOD accounts at financial institutions

This list covers the most common estate planning tools that families use to avoid probate. A family that used a TOD deed to pass the family home directly to an adult child — specifically to avoid probate — may still face a DHHS claim against that home.

Who Is Affected

DHHS estate recovery applies when:

1. The decedent was age 55 or older at the time they received Medicaid benefits
2. The benefits paid included nursing facility care, home and community-based services, or other qualifying long-term care services
3. The estate has assets — probate or non-probate — sufficient to satisfy all or part of the claim

It does not apply when:

• The decedent had a surviving spouse (DHHS must wait until the surviving spouse dies before pursuing recovery)
• The decedent had a surviving child under age 21 or a child who is blind or permanently disabled (recovery is deferred until these conditions no longer apply)
• The estate is insolvent with no recoverable assets

Even when recovery is deferred due to a surviving spouse, the clock does not stop — it merely pauses. DHHS will file its claim against the surviving spouse's estate after their death.

What Personal Representatives Must Do

Notify DHHS immediately upon appointment. Nebraska probate law requires the Personal Representative to give written notice to DHHS as part of the creditor notification process. This notice must be sent within five days of the first publication of the Notice to Creditors. Failure to notify DHHS is a breach of fiduciary duty.

DHHS will respond with either a claim for recovery or a confirmation that no recovery is owed. Do not distribute estate assets until you have received a definitive response.

Do not distribute non-probate assets prematurely. If the decedent received Medicaid, notify the TOD beneficiaries and joint tenancy successors that a DHHS claim may exist. Assets should not be sold, transferred, or spent until the Medicaid recovery question is resolved.

Include non-probate assets in DHHS communications. Under LB 268, DHHS is entitled to information about non-probate assets — not just probate assets. Withholding this information can constitute fraud against a government creditor.

Hardship Waivers

Nebraska does provide an administrative pathway for heirs to seek a Undue Hardship Waiver, which can reduce or eliminate the DHHS recovery claim. However, the Nebraska Administrative Code characterizes these waivers as a "rare and extraordinary remedy" — they are not routinely granted.

To qualify, the heir must demonstrate that estate recovery would result in serious financial hardship. Factors DHHS considers include:

• The heir's income and resources relative to poverty guidelines
• Whether the inherited property constitutes the heir's primary residence
• Whether the heir provided substantial care to the decedent that delayed their entry into a care facility

Even when hardship is documented, DHHS typically negotiates rather than fully waiving the claim. The result is usually a reduced settlement rather than a complete waiver.

Filing a hardship waiver application requires meeting strict procedural requirements and deadlines. This is a situation where consulting a benefits counselor or elder law attorney before submitting any application to DHHS is strongly advisable.

How to Minimize Medicaid Recovery Exposure (Planning Perspective)

For families engaged in proactive planning before death:

Irrevocable trusts placed sufficiently in advance of the Medicaid look-back period can potentially shelter assets from recovery — but this requires careful coordination with an elder law attorney and must be done years before care needs arise. Assets transferred within the look-back period are subject to penalty.

Funeral and burial trusts: Nebraska law exempts reasonable amounts in pre-paid funeral and burial trusts from Medicaid resource counts and from recovery. Establishing a properly structured, irrevocable pre-need funeral contract is one of the few legitimate protections available.

After the fact — once the person is already receiving Medicaid or has died — the options for reducing DHHS's recovery claim are very limited. The hardship waiver process is difficult. The best protection is planning before care needs arise.

The Practical Checklist for Personal Representatives

1. Notify Nebraska DHHS in writing within five days of first creditor publication
2. Wait for DHHS's written response before distributing any assets
3. Inform TOD beneficiaries and joint tenancy successors of the potential claim
4. Do not sell TOD property before the DHHS claim is resolved
5. If DHHS asserts a claim, review it carefully — errors in the calculation are not uncommon
6. If a hardship waiver may apply, consult a benefits counselor or elder law attorney before responding to DHHS

The Nebraska Probate Process Guide at /us/nebraska/probate/ includes a DHHS notification checklist, guidance on what to include in your initial letter to DHHS, and an overview of the hardship waiver application process.

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