Medicaid cannot take your house in Michigan while you are alive, and even after you die the state can only reach your home if it passes through probate court. Michigan’s Medicaid Estate Recovery Program, run by the Department of Health and Human Services (MDHHS), files claims against the probate estates of people who received Medicaid benefits after age 55 to recoup the cost of care. Property that bypasses probate, families who qualify for an exemption, and heirs facing genuine hardship all sit outside that reach.
What Michigan Can and Cannot Do
Michigan recovers from a narrow pool. Estate recovery applies only to assets that go through probate court administration.1State of Michigan: Medicaid Estate Recovery Program. Medicaid Estate Recovery Program – Frequently Asked Questions Property held in joint tenancy with rights of survivorship, assets held in a living trust, and property transferred by a Lady Bird deed all pass directly to survivors and never touch probate. MDHHS has no claim against them.
The costs the state tries to recover include nursing facility care, hospital stays, prescription drugs, and home- and community-based services provided after the recipient turned 55.2Centers for Medicare & Medicaid Services. Estate Recovery The authority comes from the Michigan Social Welfare Act.3Michigan Legislature. Michigan Code 400.112g – The Social Welfare Act (Excerpt)
Some states place a TEFRA lien on a Medicaid recipient’s home during life if the person is permanently institutionalized. Michigan does not. The state’s Medicaid plan confirms Michigan is not a TEFRA state and does not make permanent institutionalization determinations for lien purposes.4Michigan Department of Health & Human Services. Liens and Adjustments or Recoveries (SPA 16-0005) Your home stays untouched during your lifetime even after years of nursing facility care. No lien, no forced sale.
After death, MDHHS sends the estate representative or heirs a notice stating the amount it intends to claim and includes a questionnaire that must be returned within two weeks so the department can determine whether any exemptions apply. If the estate lacks the money or assets to cover the claim, the state collects only what is available and cannot ask surviving family members to pay from their own funds.1State of Michigan: Medicaid Estate Recovery Program. Medicaid Estate Recovery Program – Frequently Asked Questions
One important boundary: if the deceased held a long-term care partnership insurance policy and received an asset disregard, MDHHS can pursue all assets regardless of whether they passed through probate.5State of Michigan. Estate Recovery Lady Bird deeds and other probate-avoidance tools do not shield the home in that situation.
Family Members Who Block Recovery
Michigan law prevents MDHHS from recovering against the home when certain family members lawfully live there. The protection lasts as long as the qualifying person continues to reside in the home.3Michigan Legislature. Michigan Code 400.112g – The Social Welfare Act (Excerpt)
- A surviving spouse living in the home, for life.
- A surviving child under age 21.
- A surviving child of any age who is blind or permanently and totally disabled.
- A caretaker relative within the fifth degree of kinship by blood, marriage, or adoption who lived in the home for at least two years immediately before the recipient entered a nursing facility and provided care that delayed institutionalization. The fifth degree reaches children, grandchildren, siblings, nieces, nephews, aunts, uncles, and first cousins.
- A sibling who holds an equity interest in the home and lived there for at least one year before the recipient’s admission to a medical institution.
The caretaker relative exemption is the one families stumble over most. MDHHS wants documented proof that the care was medically necessary and genuinely kept the recipient out of a facility. A physician’s statement confirming the need for nursing-home-level care carries real weight, along with medical records, caregiving logs, and witness statements. Gather that documentation while the recipient is still living. Reconstructing it later is harder, and sometimes impossible.
Protecting the Home With a Lady Bird Deed
Because recovery reaches only probate assets, a Lady Bird deed is one of the most effective planning tools available to Michigan homeowners. Michigan is among the few states that recognize these deeds, formally called enhanced life estate deeds.
A Lady Bird deed names a beneficiary to inherit your home at death while leaving you in full control during life. You keep the right to live there, sell the property, mortgage it, rent it, or revoke the deed entirely. At death, the home passes directly to the beneficiary outside probate, which puts it beyond MDHHS’s reach.1State of Michigan: Medicaid Estate Recovery Program. Medicaid Estate Recovery Program – Frequently Asked Questions
A Lady Bird deed is different from an ordinary life estate deed, and the difference matters. A standard life estate requires your beneficiary’s consent to sell or mortgage and may count as a completed gift for Medicaid purposes. A Lady Bird deed preserves all your rights, which is why the transfer generally is not treated as a completed gift during your lifetime and generally does not trigger the Medicaid look-back penalty.
The deed itself is short, but the language has to be exact. Draft it wrong and it becomes a standard life estate or an outright gift, either of which creates the problem you were trying to avoid. The signed deed must be recorded with the county register of deeds. A few hundred dollars spent on an attorney familiar with Michigan Medicaid rules is worth many times its cost here.
The 60-Month Look-Back on Other Transfers
If you move your home out of your name some other way, timing matters. Michigan follows the federal 60-month look-back: when you apply for Medicaid long-term care, the state reviews any asset transfers made within the preceding five years.6Centers for Medicare & Medicaid Services. Transfer of Assets in the Medicaid Program – Important Facts for State Policymakers
Transfers for less than fair market value during that window trigger a penalty period in which Medicaid will not pay for nursing facility care. The length of the penalty equals the uncompensated value of the transfer divided by the average monthly cost of private nursing home care in Michigan, which MDHHS publishes twice a year. Give away a home worth $200,000 when the average monthly cost is $10,000, and the penalty is 20 months with no Medicaid coverage.
Adding a child’s name to the deed as a joint owner, deeding the house outright to a relative, or selling it to family for a token amount are the common missteps. Each one can create a long penalty right when care is needed and nothing is left to pay for it. A Lady Bird deed generally avoids this trap because it is not a completed transfer while you are alive.
The Undue Hardship Waiver
If no family exemption applies and no planning was done in time, an heir can still apply for an undue hardship waiver after receiving the estate recovery notice.5State of Michigan. Estate Recovery MDHHS recognizes two main grounds:
- The estate asset is the primary income source for a survivor, such as a family farm or rental property that provides the heir’s livelihood.
- The home has a fair market value of 50% or less of the average home price in the county where it is located, measured at the time of the recipient’s death.
Meeting one ground is not enough on its own. The applicant also has to pass a means test: household income below 200% of the federal poverty level for the household size, and total household resources under $10,000.7Michigan Department of Health and Human Services. Application for Hardship Waiver MSA-0008 For 2026, the income cutoff is $31,920 for a single-person household and $43,280 for a two-person household.8Federal Register. Annual Update of the HHS Poverty Guidelines
The application is MDHHS form MSA-0008. Completed applications go to Third Party Liability, P.O. Box 30435, Lansing, MI 48909, and you can request one by calling 1-877-791-0435.9Michigan Department of Health & Human Services. Your Guide to Estate Recovery in Michigan Return the initial questionnaire inside the two-week window and request the hardship application right away. Missing deadlines in this process can forfeit the waiver entirely.
Where Medicaid Stands in Line
Even when MDHHS does reach the probate estate, it does not get paid first. Michigan law ranks claims in a set order when the estate cannot cover everything.10Michigan Legislature. Michigan Code 700.3805 – Estates and Protected Individuals Code Administration costs come first, then funeral and burial expenses, then the homestead allowance, family allowance, and exempt property set aside for a surviving spouse or minor children. Only after those priorities are satisfied do federally prioritized debts, which include Medicaid estate recovery, get paid.
In a small estate, the allowances and exempt-property set-asides can absorb most of the value before MDHHS collects anything. Last-illness medical bills, other state-priority debts, and general claims fall behind Medicaid in the order. The state takes only what remains and has no power to pursue heirs personally for a shortfall.