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, DHHS can file a claim against your TOD beneficiary — typically your adult child — for the full amount of Medicaid benefits the state paid on your behalf. 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 Block Recovery

Before DHHS can pursue any estate recovery, federal law (42 U.S.C. § 1396p) requires five mandatory exemptions. Recovery is prohibited when:

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 blocked entirely — it cannot be deferred until later.

3. A blind or permanently disabled child survives. Same complete protection as minor children.

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 nursing facility, and that child's care allowed the parent to delay institutionalization, the home is exempt from recovery. This requires documentation — DHHS will challenge it without proof.

5. A sibling with equity interest lived in the home. If a sibling has an ownership interest in the home and lived there for at least one year before the Medicaid recipient entered the facility, the home is protected.

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

Strategies That Actually Work

Irrevocable Trust (With the 5-Year Lookback)

Transferring the home to a properly drafted irrevocable trust removes it from the recoverable estate. But there's a critical timing requirement: any transfer made within five years (60 months) of applying for Medicaid triggers a penalty period — you'll be disqualified from benefits for a number of months proportional to the home's value.

The trust must be irrevocable. Revocable trusts do not work because DHHS includes revocable trust assets in their expanded estate definition. Once you place the home in an irrevocable trust, you give up the right to sell it, mortgage it, or take it back — in exchange for Medicaid protection after the lookback period expires.

This strategy requires planning years in advance. If a parent is already in a nursing home or applying for Medicaid, it's too late for the lookback to clear.

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

Medicaid eligibility requires that your countable assets fall below approximately $4,000 (single applicant). The home is exempt from this count while you live in it, but it becomes recoverable 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. Triggers the 5-year lookback penalty. If you need Medicaid within five years of the gift, you face a disqualification period and 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 — they lose the stepped-up basis that would otherwise eliminate capital gains on the inherited home.

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 →