Dec92025
Estate Planning Q&A Series

How can we protect our home if one of us needs long‑term care without losing it to government recovery or nursing home costs? – North Carolina

Short Answer

In North Carolina, long-term care costs can trigger Medicaid “estate recovery,” which allows the State to collect certain paid benefits from a recipient’s estate after death, including against a home. However, there are important protections for a living spouse, strict rules on transfers within the five-year lookback period, and planning options such as carefully structured deeds, trusts, and long-term care insurance. Any plan must follow Medicaid’s transfer and ownership rules closely to protect the home without causing ineligibility.

Understanding the Problem

The focused question here is: under North Carolina estate planning and Medicaid rules, how can a married couple protect a primary residence from nursing home bills and later government recovery if one spouse eventually needs long-term care? The couple owns a home (with a mortgage) and an IRA and wants everything to go to one child. The concern centers on the Medicaid “five-year lookback,” whether moving the home into a trust or changing the deed will help, and how those steps interact with wills, powers of attorney, and future eligibility for long-term care assistance.

Apply the Law

North Carolina follows federal Medicaid rules on transfers of assets and estate recovery, then adds state procedures. For long-term care Medicaid, the State looks back five years for gifts or below-market transfers and can impose a penalty period of ineligibility. After a Medicaid recipient dies, the State may seek repayment for certain long-term care services from that person’s estate, which can include real estate that passes through probate and, in some cases, through other arrangements. The county department of social services is the front-line agency for eligibility decisions.

Key Requirements

  • Transfer and lookback rules: Gifts or below-market transfers of the home or other assets within the five-year lookback can trigger a Medicaid penalty period, delaying or denying help with nursing home or similar long-term care costs.
  • Estate recovery scope: After death, North Carolina’s Medicaid Estate Recovery Plan can file a claim against the estate for certain long-term care services paid after age 55 (or while the person was in an institution and not expected to return home), subject to hardship and cost-effectiveness limits.
  • Spousal and planning protections: A community spouse, carefully drafted powers of attorney, appropriate trusts, and sometimes long-term care partnership insurance can lawfully protect some or all of the home’s value without improper transfers.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the couple’s main concern is protecting a mortgaged North Carolina home and an IRA if one spouse later needs Medicaid-covered long-term care. A simple gift of the home to the child or to an irrevocable trust done within five years of a Medicaid application would likely count as a transfer for less than fair market value under § 108A-58.1 and could cause a significant ineligibility period. At the same time, if long-term care Medicaid is ever needed after age 55, the Medicaid Estate Recovery Plan under § 108A-70.5 could seek repayment from the estate at death unless planning keeps the home out of the recoverable estate or uses lawful exceptions or insurance-based “resource protection.”

Process & Timing

  1. Who files: The Medicaid applicant (or an authorized representative under a durable financial power of attorney). Where: The county Department of Social Services in the North Carolina county of residence. What: A long-term care Medicaid application using the current DHHS/DSS forms, with full disclosure of all asset transfers within the lookback period. When: Typically filed when long-term care is needed and the applicant believes the asset and income rules are met; transfers within the prior five years must be disclosed.
  2. The county DSS reviews financial history, including any deed changes or trust funding, and applies transfer rules and spousal protections. DSS then issues a written decision approving, denying, or penalizing eligibility based on the transfer rules and asset limits. Time frames are driven by state regulations and can vary but are generally measured in weeks from a complete application.
  3. After a Medicaid recipient who received covered long-term care services dies, the North Carolina Department of Health and Human Services may open an estate recovery file. It can present a claim in any probate opened in the clerk of superior court, or, in some cases, act like another creditor to pursue recovery against estate assets, including real property interests that qualify as part of the “estate.”

Exceptions & Pitfalls

  • Some transfers are exempt under federal and state law, such as certain transfers to a spouse; these do not create a transfer penalty but must still be structured correctly.
  • Improperly deeding the home to a child or into an irrevocable trust without market-value consideration during the lookback can bar Medicaid coverage for a period, even if the goal was protection.
  • Failing to give a trusted person broad, carefully drafted powers of attorney (including Medicaid and gifting provisions consistent with the plan) can block needed planning if one spouse becomes incapacitated.
  • Not understanding what counts as the “estate” for Medicaid recovery can lead to unpleasant surprises, because in some circumstances the recovery rules can reach beyond simple probate assets, especially when long-term care partnership insurance has been used.
  • Ignoring mortgage terms when transferring or encumbering the home can accidentally violate a due-on-sale clause or create lender problems, even if the transfer is allowed under Medicaid rules.

Conclusion

Under North Carolina law, protecting a home from long-term care costs and Medicaid estate recovery turns on three points: following the five-year transfer and lookback rules, understanding what property the Estate Recovery Plan can reach, and using lawful tools such as spousal protections, carefully structured deeds or trusts, and possibly long-term care partnership insurance. The key practical next step is to design coordinated wills, financial and health-care powers of attorney, and any deed or trust changes before a crisis, so that any future Medicaid application and estate administration follow a clear, compliant plan.

Talk to a Estate Planning Attorney

If a North Carolina couple is worried about losing a home or other assets to nursing home bills or Medicaid estate recovery, our firm has experienced estate planning attorneys who can help map out options, from deed planning to trusts and powers of attorney. 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.