Wisconsin Estate Recovery: TEFRA Liens, Waivers, and Probate Claims

Wisconsin’s estate recovery program allows the state to collect the cost of long-term care paid through Medicaid and several related programs from a person’s estate after they die. Wisconsin uses an unusually broad definition of “estate” that reaches past probate into joint accounts, payable-on-death designations, life estates, and revocable trusts, which is why families are so often surprised by the claim that arrives after a funeral.

Whose Care Triggers a Claim

Two groups of recipients fall under recovery. Anyone who was 55 or older when they received covered services is subject to it, with federal law limiting that recovery to nursing facility care, home and community-based services, and related hospital and prescription drug costs.¹ The second group is people of any age who were living in a nursing home or hospital and were not reasonably expected to return home.²

Recovery is not limited to standard Medicaid. Wisconsin also pursues costs paid through BadgerCare Plus, the Wisconsin Chronic Disease Program, the Community Options Program, and the non-Medicaid Family Care Program, covering nursing home care, community-based long-term care, home care, and personal care services.³ The state tracks what it spends throughout the recipient’s life and bills the total to the estate after death.

What Counts as the Estate

Keeping assets out of probate does not shield them. Wisconsin defines “property of a decedent” to include all real and personal property the recipient held any legal title or interest in immediately before death, including anything that passed to a survivor, heir, or assignee through joint tenancy, tenancy in common, survivorship, life estate, revocable trust, or any other arrangement.² Irrevocable trusts are the only carve-out.

A house held in joint tenancy with an adult child, a bank account with a payable-on-death beneficiary, and assets inside a revocable living trust are all reachable. The state collects from jointly owned and payable-on-death checking and savings accounts regardless of when those accounts were opened.⁴

The August 1, 2014 Line

A date-based rule applies to life estates, joint tenancy property other than bank accounts, life insurance payable to a named beneficiary, and revocable trusts. The state can only recover from these assets if they were created on or after August 1, 2014. A life estate or revocable trust set up before that date is outside the program’s reach.⁴ Older planning may offer more protection than a family expects; recent restructuring may offer less.

When Recovery Has to Wait

The state cannot collect from a deceased recipient’s property while any of these family members are living:

A surviving spouse. Recovery waits until the spouse dies.
A child under age 21. Recovery waits until the child turns 21.
A blind or disabled child of any age. Recovery waits for as long as the child lives.

These protections come from both federal and state law.¹⁵ The delay is a pause, not a cancellation. If real property is involved, the state files a lien during the deferral period, and the lien waits until the qualifying family member dies or no longer qualifies.

One protection often missed sits in the program handbook. If the surviving spouse or qualifying child sells the liened property for fair market value during their own lifetime, the state releases the lien and collects nothing from the proceeds.⁴ A surviving spouse who needs to downsize can sell the home without owing the state. Enforcement only triggers if the property is still in the estate when the protected family member dies.

TEFRA Liens on the Home

A TEFRA lien is a claim the state places on a recipient’s home while the recipient is still alive but living in a nursing home or hospital and not expected to return. The state cannot file this lien when any of these people lives in the home:

The recipient’s spouse, a child under 21, or a blind or disabled child of any age.
A sibling with an equity interest in the home who has lived there continuously for at least one year before the recipient entered the facility.

If any of those people live in the home, no lien attaches.⁴ The state also cannot lien the home of a recipient still living in the community, even if that person receives Medicaid-funded home care. Before filing, the Medicaid program must send written notice and inform the recipient or their responsible party of the right to request an administrative hearing. If the recipient later returns home, the lien must be removed.

Caregiver Children and Qualifying Siblings

Even after death, a TEFRA lien on the home cannot be enforced while either of these people still lives in the property:

A son or daughter who lived in the home continuously for at least 24 months before the recipient entered the facility and provided care that delayed that admission.⁴
A brother or sister who lived in the home continuously for at least 12 months before the recipient’s admission.⁴

The caregiver-child rule also applies to transfers during the recipient’s lifetime. A parent can transfer the home to a qualifying child without triggering a Medicaid penalty when the child lived in the home for two years before the parent entered a facility and provided care that let the parent stay home longer. The home can also go to a sibling with an equity interest who lived there for at least a year.¹ These exemptions require real documentation: proof of residency, evidence of the care provided, and records showing the care delayed institutional placement.

Hardship Waivers

Heirs and beneficiaries can ask the Department of Health Services to waive its recovery claim when enforcement would cause undue hardship. Wisconsin treats recovery as a hardship if it would make the heir eligible for public assistance such as Supplemental Security Income, food stamps, or medical assistance. Hardship also applies when the heir already receives need-based benefits like general relief or veterans benefits, or when the asset at issue produces income the heir depends on for a livelihood.

Federal law requires every state to offer a hardship waiver, with the standard being whether recovery “would work an undue hardship.”¹ The burden is on the beneficiary to prove the hardship with financial documentation: tax returns, pay stubs, and evidence tying the asset to income. A waiver applies only to the specific property it covers, not to the entire claim. Submit the request to DHS as soon as you receive notice of the state’s intent to recover.

What Happens After Death

If the recipient died in a nursing home, the facility must submit a death notification to DHS within 30 days.⁶ If the estate goes through probate, the personal representative or attorney must notify DHS of the proceeding and the claim deadline.⁴ A transfer-by-affidavit used in place of probate still requires a copy to DHS if the deceased received covered benefits.

Once notified, the Estate Recovery Program totals the recoverable services paid on the recipient’s behalf and sends a formal claim. The program can collect through probate claims, through enforcement of TEFRA liens, or by pursuing non-probate property directly under the expanded estate definition.⁵

Where the Claim Ranks in Probate

When an estate lacks the funds to pay every debt, Wisconsin sets a strict order. The estate recovery claim is treated as a debt to the state and falls into the fifth priority class, behind administration costs, funeral expenses, family allowances, and expenses of the recipient’s last illness.⁷ A small estate may pay funeral and family costs first and leave the state with partial recovery or nothing.

If You Are the Personal Representative

Distributing assets to heirs before resolving the state’s claim can expose a personal representative to liability. The personal representative must inventory estate assets and pay claims in the correct order. Contact the Estate Recovery Program early, get the claim amount in writing, and settle it before making distributions.

Medicare Is Not Medicaid

Medicare covers only a limited stretch of skilled nursing care after a qualifying hospital stay, and estate recovery does not apply to Medicare benefits. Medicaid, which Wisconsin administers as Medical Assistance, pays for long-term nursing home stays, personal care, and community-based services once Medicare runs out or doesn’t apply, and those Medicaid-funded services are what the state recovers.³ A short rehab stay fully covered by Medicare generates no recovery claim.

What To Do Now

Start with the asset picture. Find out what the recipient owns and how each asset is titled. Joint tenancy, payable-on-death accounts, and revocable trusts created on or after August 1, 2014, all sit within the state’s reach, and you cannot plan around what you haven’t identified.

Next, check whether anyone qualifies for a deferral or lien protection. A surviving spouse, a child under 21, a disabled or blind child, a caregiving child who lived in the home for two years and provided hands-on care, or a sibling with an equity interest who lived in the home for a year before admission can each delay or prevent enforcement.

Document caregiving as it happens. If an adult child moves in to care for a parent and delays the parent’s entry into a nursing home, the legal protection exists only if you can prove the residency, the care, and the delay. Keep records.

Talk to an elder law attorney before transferring any assets. Wisconsin applies a look-back period to transfers made before a Medicaid application, and transfers that don’t meet a recognized exemption can trigger a penalty period during which the applicant receives no benefits.

1
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
2
Wisconsin State Legislature. Wisconsin Code 49.496 – Recovery of Correct Medical Assistance Payments
3
Wisconsin Department of Health Services. Medicaid: Estate Recovery Program
4
Wisconsin Department of Health Services. Wisconsin Estate Recovery Program Handbook
5
Wisconsin State Legislature. Wisconsin Code 49.849 – Recovery of Correct Payments Under Certain Public Assistance Programs
6
ForwardHealth. Member Information: Estate Recovery
7
Wisconsin State Legislature. Wisconsin Code 859.25(1)(e) – Classification and Priority of Claims