How to Protect Your Home From Medicaid in Nebraska

Nebraska has one of the broadest Medicaid estate recovery programs in the country. If you or a parent receive Medicaid-funded long-term care after age 55, the Nebraska Department of Health and Human Services (DHHS) can file a claim to recover those costs from the estate — and "estate" in Nebraska means far more than just probate assets.

Understanding what DHHS can reach, and what it can't, is the starting point for any protection strategy.

What Nebraska's Expanded Recovery Covers

Most states limit Medicaid estate recovery to the probate estate — assets that pass through the will. Nebraska went further. Under Neb. Rev. Stat. § 68-919, the state expanded the definition of a recoverable "estate" to include:

• Assets in the probate estate
• Joint tenancy property with right of survivorship
• Life estate interests
• Assets held in revocable living trusts
• Annuities
• Any real or personal property the deceased held any legal title or interest in at or immediately before death

This means strategies that successfully avoid probate in Nebraska — joint ownership, living trusts, and even some beneficiary designations — do not necessarily protect assets from Medicaid recovery. DHHS can pursue recovery against these assets if the probate estate is insufficient to cover the claim.

The Transfer-on-Death Deed Trap

Transfer-on-death (TOD) deeds are popular in Nebraska because they pass real estate outside of probate. But § 76-3418 explicitly states that the TOD beneficiary is personally liable for Medicaid recovery claims if the probate estate can't cover them.

This means recording a TOD deed on your home doesn't protect it from Medicaid. When you die, the TOD beneficiary — typically your adult child — can be personally liable for any Medicaid reimbursement claim remaining unpaid after the transferor's estate is applied, limited to the value of the interest transferred. Nursing home care in Nebraska averages over $80,000 per year, so the accumulated claim can easily exceed the home's value.

Five Federal Protections That Limit or Defer Recovery

Before DHHS can pursue estate recovery, federal law (42 U.S.C. § 1396p) and Nebraska law provide protections that defer recovery or restrict foreclosure in these situations:

1. A surviving spouse is alive. Recovery is deferred until after the surviving spouse's death. The home is not at risk while the spouse lives there.

2. A minor child (under 21) survives. Recovery is deferred while a child under 21 survives; under § 68-919, recovery may be pursued after the youngest minor child reaches 21.

3. A blind or totally and permanently disabled child survives. Recovery is deferred while the child meets that standard; it may be pursued after the child no longer does.

4. A caregiver child lived in the home. If an adult child lived in the parent's home for at least two years immediately before the parent entered a medical institution, continued living there, and that child's care allowed the parent to delay institutionalization, DHHS cannot foreclose on its lien against the home while those conditions continue. This requires documentation — DHHS will challenge it without proof.

5. A sibling with equity interest lived in the home. If a sibling has an equity interest in the home, lawfully lived there for at least one year before the Medicaid recipient entered a medical institution, and lived there continuously since admission, DHHS cannot foreclose on its lien against the home while those conditions continue.

If none of these exemptions apply, the home is exposed.

Strategies That Actually Work

Irrevocable Trust (With the 5-Year Lookback)

An irrevocable trust is not automatically protective: whether the home is treated as a countable resource, a transfer subject to a penalty, or part of the recoverable estate depends on the trust terms, retained interests, and timing. But there's a critical timing requirement: an uncompensated transfer to a trust within five years (60 months) of applying for Medicaid can trigger a penalty period. The penalty is calculated from the uncompensated transfer value and the applicable average monthly nursing-facility cost.

A revocable trust does not protect the home because DHHS includes revocable-trust assets in its expanded estate definition. An irrevocable trust may limit your ability to reclaim or control the home, but its terms determine what rights remain and whether Medicaid eligibility or estate recovery is affected.

This strategy requires planning years in advance. If a parent is already in a nursing home or applying for Medicaid, an irrevocable transfer may trigger a penalty or other eligibility consequences rather than immediately protecting the home.

Life Estate With Remainder (With Caveats)

A life estate deed lets you live in the home for life while transferring the "remainder interest" to your children now. When you die, the children own the home outright — it doesn't go through probate.

The problem: Nebraska's expanded recovery definition explicitly includes life estates. DHHS can recover against the life estate interest value. A life estate alone may not provide full protection unless combined with the caregiver child exemption or structured within a Medicaid-compliant trust.

Spending Down Strategically

Nebraska's $4,000 disregard is used in the eligibility determination, but it is not a general asset limit; eligibility also depends on the program and other financial rules. The home may be treated differently for eligibility while you live in it, but it can still be reviewed for estate recovery after death.

Some families choose to use home equity (through a reverse mortgage or sale) to pay for care privately, avoiding Medicaid entirely and eliminating the recovery exposure. This only makes sense when the home's equity is modest relative to expected care costs.

Strategies That Don't Work

Gifting the home to children outright. An uncompensated transfer can trigger a five-year lookback penalty if you later seek Medicaid, unless a statutory exception applies. The length of any penalty depends on the uncompensated value and the applicable nursing-facility cost; the children may need to contribute funds for your care.

Adding children to the deed as joint tenants. DHHS can still pursue the transferred interest. Plus, you've created capital gains tax complications for your children — the transferred portion may not receive the same basis treatment as property inherited at death.

Revocable living trusts. As noted above, Nebraska explicitly includes revocable trust assets in the expanded estate definition. A revocable trust avoids probate but does not avoid Medicaid recovery.

When to Start Planning

The five-year lookback is the governing constraint. If Medicaid-funded long-term care is a realistic possibility — and statistically, about 70% of Americans over 65 will need some form of long-term care — asset protection planning should begin at least five years before any anticipated need.

The Nebraska Basic Estate Planning Kit includes a Medicaid planning chapter that walks through the expanded recovery rules, the lookback calculation, and the documentation you need for each federal exemption.

See more Nebraska guides →