Dec292025
Estate Planning Q&A Series

How can I protect a relative’s house from Medicaid estate recovery if they are moving into assisted living? – North Carolina

Short Answer

In North Carolina, Medicaid can seek repayment after a recipient’s death through a claim against the recipient’s “estate,” and the definition of “estate” can reach certain property interests that pass outside probate. Protecting a house usually means planning around (1) Medicaid eligibility rules that penalize gifts or below-market transfers and (2) the estate recovery rules that apply after death. The safest approach depends on how the home is titled now, whether Medicaid will pay for long-term care services, and whether any statutory exceptions or hardship waivers may apply.

Understanding the Problem

When a North Carolina resident moves from a hospital setting into assisted living, a common question is whether the relative’s house can be kept from Medicaid estate recovery if Medicaid later pays for long-term care-related services. The decision point is whether the house should stay titled in the relative’s name (and be dealt with later through the estate) or be re-titled during life, knowing that certain transfers can trigger Medicaid penalties. The key timing issue is that planning done after a health decline and close to a Medicaid application can create eligibility problems even if the goal is simply to keep the home in the family.

Apply the Law

North Carolina operates a Medicaid Estate Recovery Plan through the Department of Health and Human Services (DHHS). If Medicaid pays for certain services (often long-term care-related services for people age 55 or older), DHHS may seek repayment after death from the recipient’s estate, up to the amount Medicaid paid. Separately, North Carolina enforces “transfer of assets” rules: if the recipient (or spouse) transfers assets for less than fair market value within the lookback period, Medicaid can impose a penalty period of ineligibility for certain long-term care services. In practice, protecting a house requires coordinating both sets of rules and confirming the exact benefit program involved (for example, Medicaid long-term care services versus other assistance programs with their own transfer and recovery policies).

Key Requirements

  • Confirm whether Medicaid estate recovery is even triggered: Estate recovery generally relates to Medicaid payments for specific categories of services (often long-term care-related services), and DHHS can only recover up to what Medicaid actually paid.
  • Avoid disqualifying transfers: Transferring a house (or any asset) for less than fair market value within the lookback window can cause a Medicaid penalty period that delays coverage for certain services.
  • Understand what “estate” can include: In North Carolina, “estate” for recovery purposes can include probate assets and, in some situations, certain non-probate transfers where the recipient kept an interest at death (for example, some survivorship arrangements or trust/life estate structures), depending on the circumstances.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The facts describe a hospitalized relative expected to move into assisted living, with a family member holding durable power of attorney and being listed on bank accounts and possibly as a co-owner of the home. Under North Carolina law, changing ownership of the home or moving assets out of the relative’s name to “shelter” them can create a transfer penalty if done for less than fair market value within the lookback period, which can delay Medicaid coverage for certain long-term care services. Even if the home stays in the relative’s name, DHHS may later pursue estate recovery after death for covered Medicaid services, and the recovery definition of “estate” can reach beyond simple probate property in some circumstances.

Process & Timing

  1. Who files: The Medicaid applicant (or authorized representative under a valid power of attorney). Where: The county Department of Social Services (DSS) in North Carolina. What: A Medicaid application plus supporting documents (income, resources, deeds, bank records, and transfer history). When: Before or during the period when long-term care-related Medicaid coverage is needed; timing matters because transfers within the lookback window can trigger penalties.
  2. Eligibility review: DSS reviews resources, income, and transfers. If the home was transferred for less than fair market value, DSS can impose a penalty period under the transfer rules. If an exception applies or the transfer was for a non-Medicaid purpose, documentation becomes critical.
  3. After death: If Medicaid paid for covered services, DHHS may present an estate recovery claim during the estate administration process. The personal representative (executor) typically addresses creditor claims, including DHHS, in the statutory order of claims.

Exceptions & Pitfalls

  • Adding a child to the deed or accounts can backfire: Putting someone on title or adding a joint owner may be treated as a transfer for less than fair market value, or it may create ownership and creditor issues that were not intended.
  • “Co-owner” status needs verification: A deed might show joint tenancy with right of survivorship, tenancy in common, or a life estate arrangement. Each can affect both Medicaid eligibility analysis and whether DHHS can argue the interest is part of the recoverable “estate.”
  • Power of attorney limits: Even with a durable power of attorney, the agent must follow the document’s powers and fiduciary duties. Some gifting or re-titling actions may be restricted by the document or may create later disputes.
  • Hardship waiver is not automatic: North Carolina law allows DHHS to waive recovery (in whole or part) when recovery would be inequitable due to undue hardship or when recovery is not cost-effective, but the waiver depends on proof and the agency’s process.
  • Assisted living vs. nursing facility coverage: Not every assisted living bill is paid by Medicaid in the same way. The services Medicaid pays for can affect whether estate recovery is triggered and what amount may be claimed.
  • Pooled trust payback rules: If a pooled trust is used for certain planning situations, North Carolina law requires payback to the State from remaining funds at death or termination, which can limit how much is “protected.”

Conclusion

In North Carolina, protecting a relative’s house from Medicaid estate recovery usually requires planning for two separate rules: (1) transfers for less than fair market value can trigger a Medicaid ineligibility penalty during the lookback period, and (2) DHHS can seek repayment after death from the recipient’s “estate,” which can include certain non-probate interests. The next step is to confirm the home’s current deed and any recent transfers, then file the Medicaid application through the county DSS with complete documentation before making any ownership changes.

Talk to a Estate Planning Attorney

If a family is dealing with a move to assisted living and concerns about Medicaid estate recovery and transfer penalties, our firm has experienced attorneys who can help explain options and timelines under North Carolina law. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Estate Planning Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.