Can Medicaid Take Your House in New Jersey? How Estate Recovery Works

The short answer: not while you are alive, and not while your spouse is alive, but after that, yes. New Jersey does not file a lien on your home when you apply for Medicaid, and it does not force a sale during your lifetime. After a Medicaid recipient dies, however, the Division of Medical Assistance and Health Services is required by federal and state law to recover what Medicaid paid for services received on or after age 55, and New Jersey defines the estate it can reach more broadly than most states. It includes not just what passes under a will but the recipient’s share of jointly owned property, property in a revocable living trust, and other assets that pass to survivors outside probate. Recovery waits while a surviving spouse or a minor or disabled child is living, and a hardship waiver exists but is narrow.

This article explains what New Jersey recovers and from what, the exceptions and deferrals, how the lien and waiver process works, how New York and Connecticut differ, and how planning done early keeps a home in the family.

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What Is Medicaid Estate Recovery?

Federal law requires it. Under 42 U.S.C. 1396p(b)(1), a state must seek recovery from the estate of any individual who was 55 or older when they received Medicaid, for nursing facility services, home and community-based services, and related hospital and prescription drug costs. States may recover more, and New Jersey does. Under N.J.S.A. 30:4D-7.2 and the Division’s regulation at N.J.A.C. 10:49-14.1, New Jersey recovers “assistance correctly paid or to be paid on his behalf for all services received when he was 55 years of age or older.” That includes the fixed monthly capitation payments the State makes to a Medicaid managed care plan for a recipient enrolled in the Managed Long Term Services and Supports program, whether or not the recipient used many services in a given month. A person who received home care through Medicaid for four years, and spent nothing on a nursing home, still leaves an estate liable for four years of capitation payments.

Recovery does not depend on anything having been done wrong. It applies to benefits correctly paid to eligible people. Every New Jersey Medicaid application discloses it, and the disclosure is easy to miss.

What Does New Jersey Count as the “Estate”?

This is where New Jersey is stricter than federal law requires. The federal definition covers the probate estate, and gives states the option to go further. New Jersey took the option. Under N.J.S.A. 30:4D-7.2(a)(3), the estate “includes all real and personal property and other assets included in the recipient’s estate” for probate purposes, “as well as any other real and personal property and other assets in which the recipient had any legal title or interest at the time of death, to the extent of that interest, including assets conveyed to a survivor, heir or assign of the recipient through joint tenancy, tenancy in common, survivorship, life estate, living trust or other arrangement.” The regulation adds that “other arrangement” includes testamentary trusts and annuities, and reaches proceeds from the sale of such property that remain in a survivor’s hands.

In practice that means:

• A house owned jointly with a child, with right of survivorship, is reached to the extent of the parent’s interest, even though it passes to the child outside probate.
• A house or account in a revocable living trust is reached, because the recipient held an interest at death.
• Bank accounts held jointly with a child are reached to the extent of the parent’s interest.
• An annuity that was allowed to remain during eligibility must name the State as remainder beneficiary, and the State collects what remains.

Life insurance payable to a named beneficiary belongs to the beneficiary and is not recovered, but proceeds payable to the estate, including by default when the named beneficiary died first, are.

What Is Excluded?

The regulation carves out a short list. The estate does not include:

• A life estate that ended at death. Where the recipient kept a life estate in a home and deeded the remainder to a child, the life estate expires at death and there is nothing left to recover. The remainder interest belongs to the child. This is the reason life estate deeds have been a staple of New Jersey Medicaid planning, subject to the five-year look-back on the transfer of the remainder.
• Certain third-party trusts. A discretionary trust created by someone else for the recipient’s benefit, and a discretionary testamentary trust, are excluded if the recipient had no interest in them within the periods the regulation specifies.
• Holocaust reparations and related payments, by statute.
• Long-term care partnership assets. Under N.J.S.A. 30:4D-7.2a, assets disregarded at eligibility because of a qualifying long-term care insurance partnership policy are protected from recovery up to the amount disregarded.

Assets the recipient gave away outright, or placed in an irrevocable trust in which they kept no interest, more than five years before applying are not part of the estate because the recipient had no legal title or interest at death. That is the foundation of asset protection trust planning. Where the recipient kept an income interest in an irrevocable trust, the Division may assert a claim to the extent of that interest, and the trust’s drafting decides how much is exposed.

When Is Recovery Postponed or Barred?

Under N.J.S.A. 30:4D-7.2a and the federal rule it tracks, no recovery is sought while there is “a surviving spouse or a surviving child who is under the age of 21 or is blind or permanently and totally disabled.” The right to recover is deferred, not extinguished. When the spouse dies, the child turns 21, or the disability ends, the Division may recover from whatever estate assets remain. The Division’s own guidance to families says so directly.

Recovery is barred entirely where “the amount sought to be recovered is less than $500” or “the gross estate is less than $3,000.” Both thresholds have been in the statute for decades and are rarely relevant to an estate that includes a house.

Federal law and the New Jersey regulation add one more deferral for the home. Where a family member lived continuously in the recipient’s home before the recipient’s death and it remains that family member’s primary residence, the Division may record a lien but will not enforce it until the property is sold or the family member dies or moves out. A sibling with an equity interest who lived in the home for a year before the recipient’s institutionalization, and an adult child who lived there for two years and provided care that kept the recipient out of a facility, are the protected residents under the federal statute.

Does Medicaid Put a Lien on Your House While You Are Alive?

In New Jersey, generally no. Federal law permits a state to lien the home of a permanently institutionalized recipient during life, and New York does so. The Division’s guidance to New Jersey families states that “when you apply for Medicaid, a lien is not filed against your property,” and that a lien is placed after death when there is no surviving spouse or protected child. New Jersey’s lien is a post-death collection device. Under N.J.S.A. 30:4D-7.2(d), the Division’s claim is a preferred claim against the estate with statutory priority over most other creditors, behind funeral and administration expenses. An executor who distributes the estate to heirs before satisfying it can be personally liable. Anyone affected by a lien may challenge its validity in the Superior Court under N.J.S.A. 30:4D-7.8.

The Division learns of deaths through its own data matching and through the estate. Executors and surviving joint owners typically receive a letter stating the amount claimed and the basis, and the letter starts the clock on the hardship waiver.

How Does the Undue Hardship Waiver Work?

Federal law requires every state to have one, and New Jersey’s is among the narrowest. Under N.J.A.C. 10:49-14.1, undue hardship “can be demonstrated only if the estate subject to recovery is or would become the sole income-producing asset of the survivors, and pursuit of recovery is likely to result in one or more of those survivors becoming eligible for public assistance and/or Medicaid benefits.” There is “a rebuttable presumption that no undue hardship exists if the hardship resulted from estate planning methods under which assets were divested in order to avoid estate recovery.” The estate representative has 20 days from receipt of the Division’s notice to request a waiver or compromise, with supporting evidence, and a request received after that “shall not” be granted. The Division must decide within 45 days, and its decision can be contested at an administrative hearing on a request made within 20 days.

The cases show how strict the standard is. In Estate of L.P. v. Division of Medical Assistance and Health Services, an unpublished Appellate Division decision from November 2019, a son who had personally paid to maintain his mother’s house during her final years and expected to be repaid from its sale asked for a waiver of a claim of more than 132,000 dollars. The Division denied it, and the court affirmed, because a house that is not producing income for survivors who would otherwise need public assistance does not meet the definition. A family home the children want to keep is, without more, not a hardship under New Jersey’s rule.

How Do New York and Connecticut Differ?

New York recovers only from the probate estate. Under Social Services Law section 369, the estate is defined as property “passing under the terms of a valid will or by intestacy.” Jointly held property, property in a revocable trust, and beneficiary-designated accounts are outside recovery, which is why avoiding probate is itself a planning tool in New York in a way it is not in New Jersey. New York may, however, place a lien during life on the home of a permanently institutionalized recipient who is not expected to return, unless a spouse, minor or disabled child, or qualifying sibling lives there. New York also limits recovery to the federal categories of nursing facility, home and community-based, and related services for most recipients, rather than all services.

Connecticut narrowed its program sharply in 2022. Under General Statutes section 17b-93(a), since July 1, 2022 the State “shall not recover properly paid” medical assistance by lien or claim “unless the state is required to recover such assistance under federal law,” and liens filed before that date for assistance not federally required to be recovered are deemed released. Under section 17b-95, the State’s claim against a deceased recipient’s estate is limited to amounts “the state is required to recover under federal law,” reduced to the extent the surviving spouse, parent, or dependent children need the estate for support.

A New Jersey family with a relative in one of those states, or a New Jersey resident considering a move, should understand that the exposure of the home differs materially across the three states.

How Do You Protect a Home From Estate Recovery in New Jersey?

The tools are the same as for Medicaid eligibility generally, and they work only if used early:

• An irrevocable trust funded more than five years before applying. A home deeded to a properly drafted irrevocable trust is outside the recipient’s estate at death because the recipient holds no title. Drafted correctly, it can also preserve the step-up in basis for the children and let the parent keep living there. Our article on keeping a vacation home in the family describes the design choices.
• A life estate deed, with the remainder to children, made more than five years before applying. The life estate ends at death, and New Jersey’s regulation excludes it from the estate. The trade-offs are loss of control over the remainder and complications if the house must be sold during life.
• Transfers to a spouse or to a disabled child, which are exempt from the transfer penalty and remove the asset from the recipient’s estate, though the spouse’s own later Medicaid exposure must be considered.
• Long-term care partnership insurance, which protects a matching amount of assets from both eligibility and recovery.
• Not relying on joint ownership or a revocable trust. Both avoid probate, and neither avoids New Jersey estate recovery.

For a family already facing a claim, the steps are to obtain the Division’s itemized statement and confirm the recipient’s age at each date of service, identify any protected survivor that defers recovery, evaluate the hardship waiver within the 20-day window, and confirm that the assets the Division counts were actually the recipient’s, to the extent of their actual interest. A joint account funded entirely by a child, for example, is not the parent’s interest merely because the parent’s name was on it, but proving that requires records.

Our article on whether Medicare or Medicaid covers adult day care explains the programs whose payments end up in a recovery claim.

Plan Well. Live Better.

Medicaid pays for care that most families could not afford, and New Jersey’s estate recovery program is the price. The difference between a family that keeps the house and one that does not is almost always when they started planning. At Milvidskiy Law Group, we help families protect their homes and savings while qualifying for the care they need, and we represent estates when the Division files a claim. Learn more about our Medicaid planning services.

This article is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. Medicaid estate recovery depends on the recipient’s dates of service, family circumstances, and how assets were held, and the rules change. Statutes, regulations, and agency guidance described here were verified in September 2026 against federal law, the New Jersey Statutes and Administrative Code, Division of Medical Assistance and Health Services publications, and New York and Connecticut law, and should be confirmed before relying on them.