Protecting Your Home from Medicaid Estate Recovery in Virginia—A Comprehensive Guide

Don’t let Medicaid “take the house.” Learn how Virginia’s 2025 Medicaid rules allow you to shield your family home from nursing home costs and estate recovery.

It’s a scenario too many Virginia families fear: A loved one needs nursing home care, and you worry that Medicaid will come after the family home. “Will Medicaid take the house?” is a common, anxiety-filled question. The good news is that with the right planning, you can protect your home from Medicaid estate recovery and avoid a forced “spend-down” of everything you’ve worked for. This comprehensive guide (updated with 2025 figures) breaks down Virginia-specific Medicaid rules and proactive strategies; from exempt assets to Lady Bird deeds and the 5-year lookback. You can safeguard your home and legacy.

Understanding Medicaid Estate Recovery in Virginia

Medicaid Estate Recovery is a federal mandate requiring states to recoup Medicaid long-term care costs from a deceased recipient’s estate. In Virginia, this means that after a Medicaid recipient age 55+ dies, the state’s Department of Medical Assistance Services (DMAS) will seek reimbursement for what it paid on their behalf. For most families, the house is the largest asset at stake in this process.

What counts as the “estate”? Virginia uses an expanded estate recovery definition. This includes all property the individual had any legal title or interest in at the time of death—even assets that don’t go through probate. In practical terms, Virginia is an “expanded estate recovery” state. Medicaid can pursue not only the probate estate, but also things like jointly owned bank accounts, life estate interests, certain trusts, and transfer-on-death assets. Simply putting your home in joint names or naming a TOD beneficiary is not foolproof in Virginia. For example, a Transfer-on-Death (TOD) deed avoids probate, but under Virginia law the home can still be used to pay off creditors (including Medicaid) if the probate estate is insufficient. In fact, the law (Va. Code § 64.2-634) explicitly makes TOD-deeded property subject to the decedent’s debts if the rest of the estate can’t cover them. In short, Virginia’s estate recovery can reach non-probate transfers—a critical point to understand when planning.

When does recovery happen? Only after the Medicaid recipient’s death and only if no protected survivors are living. Virginia law forbids estate recovery while a surviving spouse is alive (who wasn’t also on Medicaid), or if a minor child or a blind/disabled child survives. In other words, Medicaid won’t claim your house at the time of your death if, say, your healthy spouse is still living in it. (Recovery may be attempted later, after the spouse passes away, if the home then becomes part of the Medicaid recipient’s estate.) Also, Virginia cannot enforce recovery if a surviving child under 21 or a permanently disabled child of any age is still living in the home. These protections are built into both federal and state law.

How does recovery actually occur? Typically, DMAS files a claim against the estate for the amount of Medicaid benefits paid. In practice, if the estate’s assets (like the house) are needed to pay that claim, they may have to be sold to satisfy Medicaid’s lien or demand. Virginia’s claim is capped at the lesser of the Medicaid costs or the value of the estate. Importantly, Virginia offers hardship waivers and exceptions in some cases. If selling the home would cause “undue hardship” to heirs (for instance, it’s a family farm or the heirs would be impoverished by the sale), DMAS can waive or compromise the claim. Always communicate with DMAS if heirs wish to keep the property—in some cases, family members can arrange a repayment plan to keep the home. (Virginia regulations specify that recovery must be waived if it would result in substantial hardship to the heirs, and heirs who are on Medicaid themselves are automatically exempt from recovery.)

Key point: Just because your home was exempt during Medicaid eligibility doesn’t mean it’s exempt from estate recovery. Virginia explicitly notes that a home can be included in the recoverable estate even if it was not counted for eligibility purposes. Estate recovery is about recouping costs after death, whereas “exempt asset” rules apply during your lifetime for eligibility.

Medicaid Eligibility vs. “Taking the House” - What Are the Rules?

Many people confuse Medicaid’s initial spend-down requirements with estate recovery. It’s critical to understand the difference:

Exempt assets during your life: Medicaid has strict asset limits (usually $2,000 for a single person in Virginia) to qualify for long-term care coverage. However, certain assets are not counted toward that limit, allowing you to keep them without affecting eligibility. The primary residence is generally exempt as long as you (or your spouse) live in it, or you express an “intent to return home” if you’re in a nursing facility. Virginia does impose a home equity cap—about $730,000 in equity as of 2025—for a single person with no spouse at home. (Homes above that value may require special planning or a waiver, since federal law allows states to deny coverage if home equity exceeds a limit that is $730k in 2025, with states having option up to $1,097,000.) Other common exempt assets include: one vehicle (any value) used by you or a family member, household furniture and personal belongings, certain small life insurance or burial funds, and retirement accounts in payout status. For example, Virginia Medicaid allows you to set aside funds in an irrevocable burial trust or prepaid funeral plan without it counting against you. (Also, a small life insurance policy with face value $1,500 or less is exempt; anything above that may need to be cashed out or spent down.) These rules mean Medicaid won’t force you to sell your house or car to get benefits in Virginia, up to these limits.

Countable assets (the “spend down”): Assets like cash, savings, investments, second properties, and any asset not specifically exempt must be spent down or converted before Medicaid will pay. Virginia’s asset limit for a single Medicaid applicant is $2,000; married couples have higher combined allowances (the Community Spouse Resource Allowance lets a healthy spouse keep a significant portion, discussed below). However, don’t start giving things away without a plan—large gifts or transfers can violate Medicaid’s 5-year lookback rule and trigger penalties. (Medicaid will review 5 years of your financial history to see if you transferred assets for less than fair market value to meet the limit.) If you did, Medicaid imposes a penalty period of ineligibility proportional to the amount given away. Example: If you deed your $300,000 house to your children for free one year before you apply, Medicaid could penalize you with a lengthy period during which it won’t pay for your care. Bottom line: last-minute transfers can backfire without an exemption or professional guidance.

Intent vs. reality—will you lose the house while alive? If you’re a homeowner on Medicaid in Virginia, rest assured Medicaid will not simply take your house while you’re living. You can continue to own it. In some states, Medicaid may place a lien on the home before death if you’re permanently institutionalized with no chance of returning home, but Virginia does NOT impose pre-death liens on a recipient’s property. The Virginia Medicaid program’s own regulations state that the Commonwealth “does not recover through the imposition of liens”. Instead, Virginia’s mechanism is to wait and recover costs from the estate later (after death). And by law, no lien or recovery can occur if a spouse or certain dependent relatives are living in the home. So during your lifetime (and your healthy spouse’s lifetime), the home is safe from forced sale. The real threat comes after death, when Medicaid’s estate recovery kicks in if no exempt survivor is in place.

Spend-down strategies: To qualify for Medicaid without losing assets, families often convert countable assets into exempt ones. For example, they might spend excess savings on home improvements, purchase an irrevocable funeral trust, pay off debt, or buy items for the home. These are legitimate spend-down techniques that do not violate Medicaid rules. What you cannot do is gift away assets or sell them for below market value right before applying—Medicaid will penalize that (as explained above). However, there are allowed transfers that won’t trigger penalties (see next section). The key is to plan carefully and follow the rules, or else the Medicaid application could be delayed or denied due to a transfer penalty.

Takeaway: Medicaid likely won’t make you sell your home while you or your spouse are alive, thanks to asset exemptions. But without planning, that same home can be claimed after your death to repay Medicaid. The next section explains proactive strategies to prevent Medicaid from ever taking your house—legally and within Virginia’s rules.

Proven Strategies to Protect Your Home (and Other Assets) in Virginia

Protecting your home from nursing home costs and estate recovery requires foresight and the right tools. Virginia’s Medicaid rules are nuanced, but they also offer opportunities to safeguard your property if you plan carefully. Here are the most effective strategies:

1. Leverage Spousal Protections (If You’re Married)

Married couples have powerful protections under Medicaid rules. When one spouse needs long-term care and the other is healthy (a “community spouse”), the healthy spouse is allowed to keep the home and a significant amount of the couple’s assets without disqualifying the applicant spouse. Key points for couples:

Transfer the home to the healthy spouse: Medicaid allows unlimited asset transfers between spouses. If a Virginia senior needs Medicaid and is married, an elder law attorney will often deed the house entirely to the healthy spouse’s name. This keeps the home 100% exempt during the ill spouse’s care and ensures that when the ill spouse dies, the home is not in his/her estate for Medicaid recovery. (Medicaid cannot recover from a surviving spouse’s estate for the cost of the predeceased spouse’s care.) Example: John enters a nursing home on Medicaid, wife Mary remains in the community. They put the house in Mary’s name alone. When John dies, Virginia Medicaid has no claim against the house because John owned no interest at death—it belonged solely to Mary. (Caution: If the community spouse later needs Medicaid, further planning is needed so the house doesn’t eventually end up subject to their own estate recovery.)

Use the Community Spouse Resource Allowance (CSRA): Apart from the home, the community spouse in Virginia can keep a large portion of the couple’s other assets—up to $157,920 in 2025—and even more in some cases. This is the CSRA, a resource allowance intended to prevent spousal impoverishment. In practical terms, you don’t have to spend down to absolute zero; careful allocation can preserve assets for the spouse at home. For instance, if a couple has $200,000 in savings, roughly half can often be preserved for the healthy spouse under the CSRA formula (Virginia uses the federal maximum of $157,920 in 2025). The community spouse is also entitled to a minimum income allowance, so they don’t become impoverished by the cost of the other’s care. This is called the Minimum Monthly Maintenance Needs Allowance (MMMNA)—it allows the healthy spouse to keep a certain amount of income per month (if their own income is below about $2,644 as of mid-2025, the ill spouse’s income can be diverted to them up to a cap of about $3,948 per month). These spousal allowances mean the healthy spouse can often keep the house and enough income and assets to live on.

Estate planning for the community spouse: To be extra safe, the healthy spouse should update his or her own estate plan. For example, if Mary (in the example above) intends to leave the house to the kids, doing so through a revocable living trust or carefully-crafted will can avoid it passing back to John (if he were still alive) or otherwise being subject to Medicaid claims if Mary eventually needs care. In Virginia, the home held solely by the healthy spouse is not subject to the ill spouse’s Medicaid estate recovery at the first death—but if the healthy spouse later requires Medicaid, that asset could then be at risk. Strategies like Medicaid Asset Protection Trusts (discussed below) can be initiated by the healthy spouse if appropriate, to start the five-year clock and protect the home for the next generation.

Bottom line: If you’re married, take advantage of spousal transfers and allowances. By legally shifting assets to the healthy spouse, you can keep your home out of reach of Medicaid recovery—at least until both spouses have passed. (By that time, further planning can often protect the estate for your children or heirs.)

2. Use Virginia’s Caregiver Child & Sibling Exceptions

What if you’re not married or your spouse also needs care? Virginia follows federal Medicaid exceptions that let you transfer your home to certain family caregivers without penalty—and doing so also protects the home from estate recovery because it will no longer be in your name at death. These often-overlooked exemptions are:

The Caregiver Child Exemption: You can deed your home to an adult child who’s been caring for you at home, and Medicaid will not impose a transfer penalty. To qualify, the child must have lived in your home for at least two years immediately before you moved to a nursing home and provided care that kept you out of the nursing facility during that time. This is a high bar—essentially, the child’s caregiving delayed your need for institutional care. If so, Virginia Medicaid allows a full transfer of the house to that child as a reward for their support. The result: the house is now the child’s property, completely outside your estate, and Medicaid cannot recover against it. (Be sure to document the care provided and the timeline, in case Medicaid asks for proof.) This caregiver exception is set out in federal law and Virginia adheres to it. It can be a wonderful solution for families where one devoted child gave up time to keep Mom or Dad at home.

The Sibling Co-Owner Exemption: Similarly, you can transfer your home to a sibling who has an equity interest in the house and who lived there with you for at least one year before you entered long-term care. For example, if you and your brother jointly own your home and he’s been living there, you can give him your share without penalty. Again, no Medicaid lookback penalty applies and the home will be protected from estate recovery, since the Medicaid recipient no longer owns it. (This is less common, but important for cases where an unmarried sibling has been sharing a home.) Federal law provides this exemption. In plain terms, the Sibling Exemption allows a home transfer to a brother or sister who has been a co-owner and co-resident for at least one year. The transferred house would then be in the sibling’s name, out of the Medicaid recipient’s estate.

These family transfer exemptions are powerful, but they must be used correctly. It’s best to consult an elder law attorney to ensure you meet the criteria and handle the deed transfer properly. When done right, you preserve the home in the family and avoid both spend-down and estate recovery entirely for that asset.

3. Plan Ahead with an Irrevocable “Medicaid Protection” Trust

For Virginians looking 5+ years down the road, an irrevocable trust can be the gold standard to protect the home and other assets. Often called a Medicaid Asset Protection Trust (MAPT), this legal tool lets you transfer your residence (and perhaps other savings) into a trust while reserving the right to live there for life. Once the trust is established and five years pass, the assets in the trust are beyond Medicaid’s reach—they won’t count toward your eligibility, and crucially, they won’t be in your estate for recovery purposes.

How it works: You (the owner, or “grantor”) set up an irrevocable trust and name a trustworthy family member or institution as trustee. You transfer the deed of your home into the trust. Because the trust is irrevocable, you no longer legally own the home—the trust does. (You can retain the right to live there rent-free and even to have the home sold and a new home purchased by the trust for you, depending on the trust terms.) During the next 60 months (5 years), you must plan carefully, because any transfer into the trust is subject to Medicaid’s 5-year lookback. You need to get past five years from the date of transfer before applying for Medicaid; otherwise a penalty will delay your benefits. After five years, the assets in the trust are fully protected. If you eventually need nursing home care, Medicaid will not count the trust assets as yours. And when you later pass away, those assets are not in your estate—no estate recovery can touch them. Your trustee can then distribute the home (or its sale proceeds) to your chosen beneficiaries (your children or heirs) according to the trust instructions.

Advantages of the trust approach: You avoid probate and estate recovery on the trust assets (the home bypasses your estate entirely). You can potentially preserve tax benefits. For instance, if your house is in the trust until your death, your children can still get a step-up in cost basis for capital gains tax purposes, just as if they inherited it outright. This means if they sell the house after your death, they pay minimal or no capital gains tax on the increase in value during your lifetime—a big tax advantage over gifting the house outright during life. You also maintain some control and use of the property (unlike giving it directly to a child where you lose all control). With a properly drafted trust, you can even have the home sold and another purchased if needed, all within the trust. And most importantly, the home is shielded from Medicaid—it won’t count against you for eligibility, and it won’t be subject to recovery claims.

The downsides: It’s irrevocable, meaning once you place the home into the trust, you generally can’t change your mind and take it back out (at least not without potentially dismantling the protection). You also cannot tap the home’s equity (e.g. with a home equity loan or reverse mortgage) for your own benefit once it’s in the trust, since it’s no longer yours. Therefore, this strategy is best for those who are relatively sure they won’t need to sell or borrow against the home’s value for personal use within the next five years. It’s a long-term planning tool, not a quick fix.

Note: Irrevocable trusts must be set up well in advance of needing Medicaid to be effective (due to the 5-year lookback). But when implemented timely, they are one of the few ways to completely protect a home from both Medicaid eligibility spend-down and estate recovery. Many Virginia families use MAPTs as part of their estate plan to preserve the family home for the next generation.

4. Consider Life Estate Deeds (Traditional vs. “Lady Bird” Deeds)

Another legal tool to protect a home from probate and, potentially, from recovery is a life estate deed. This is where you transfer a remainder interest in the home to your heirs now, but retain a life estate—the right to live in and use the home for the rest of your life. Upon your death, full ownership automatically passes to your named beneficiaries (children, etc.) without going through probate. The idea is that if the home isn’t in your probate estate, Medicaid can’t recover it.

Important: In an expanded recovery state like Virginia, a standard life estate may not completely shield the home. Virginia Medicaid could still attempt to make a claim, since the law considers any legal interest you had at death as part of the recoverable estate. However, because your life interest ends upon death, what Medicaid can actually recover might be limited or difficult to pursue. In many cases, the life estate approach does help deter recovery: since the property passes directly to your heirs at death, there is no asset in your estate for Medicaid to place a claim on. The state would have to pursue other legal avenues to try to recover the value of the life estate (which actuarially was worth something during your life, but is worth $0 at the moment of your death). This can be complex for the state and is not commonly undertaken in Virginia. In fact, there is no Virginia case law yet confirming estate recovery against a life estate interest. Many Virginia families and attorneys use life estate deeds as part of Medicaid planning, but it must be done carefully and ideally well in advance:

Traditional Life Estate Deed: You sign a deed that grants your house to your beneficiaries (children, etc.) but retains a life estate for yourself. This immediately creates a transfer of the remainder interest—which will trigger the Medicaid lookback penalty if you need Medicaid within 5 years of doing this. So it’s only a safe strategy if you plan far ahead (5+ years). While alive, you keep the right to live there and are typically responsible for taxes and maintenance. However, you cannot sell or refinance the home without your remaindermen’s consent (because they own an interest). The benefit: at death, the property passes to your heirs outside probate, and in many states Medicaid does not recover against life estates once the life tenant dies. In Virginia, expanded recovery rules might theoretically include the life estate in the estate, but practically, since the property is no longer titled to you at death, Virginia would have to file a claim or suit against the heirs to recover the value of your terminated life interest. That is rarely pursued. (Notably, your heirs still get a stepped-up tax basis on the home because a life estate arrangement is generally included in your taxable estate for IRS purposes. This step-up in basis minimizes capital gains if they sell the house later.)

“Lady Bird” Deed (Enhanced Life Estate): You may have heard of Lady Bird deeds, which are like a life estate deed on steroids—you transfer a remainder interest but keep the right to revoke or sell the property without the remainderman’s consent during your life. This avoids the gift being completed, so it does not trigger a Medicaid penalty and you maintain full control while alive. Upon death, it functions like a life estate: the property passes to your named beneficiaries outside probate. Unfortunately, Virginia does not recognize Lady Bird deeds (only about five states do). Virginia instead adopted the Transfer-on-Death deed (discussed earlier), which, as noted, doesn’t avoid creditor claims. In short, Lady Bird deeds are not a viable tool in Virginia Medicaid planning—be wary of generic advice suggesting them without noting state differences.

In summary: A traditional life estate deed can be a useful part of planning (especially to avoid probate and potentially deter Medicaid claims), but it must be done well in advance to avoid the 5-year lookback penalty. Always consult with a Virginia attorney to weigh this option against an irrevocable trust. Trusts often provide more flexibility than life estates, but each case is unique.

5. Invest in Long-Term Care Insurance (Partnership Program)

One proactive way to protect your home and other assets is to plan so that Medicaid is never needed, or to at least increase the amount of assets you can shield. Virginia participates in the Long-Term Care Partnership Program, which encourages the purchase of qualified long-term care insurance policies. Under this program, for every dollar a partnership policy pays out for your care, that same dollar amount of your assets is disregarded for Medicaid eligibility and estate recovery.

For instance, if you have a partnership long-term care policy that pays $200,000 toward your nursing home care, you can qualify for Medicaid while keeping an extra $200,000 in assets above the normal limits—and after death, that $200,000 is exempt from estate recovery by Virginia Medicaid. This could easily cover the value of a home. Essentially, insurance “pre-pays” the care and buys you a protected asset allowance.

While long-term care insurance requires advance planning and not everyone can afford or medically qualify for a policy later in life, it’s worth mentioning for those in mid-life planning for their senior years. A policy can preserve your estate and reduce the burden on Medicaid, making it a win-win if feasible. Virginia’s partnership program, in particular, ensures you get an estate recovery credit for every dollar of benefits from a qualified policy.

6. Don’t Overlook Smaller Exempt Assets and Income Strategies

The family home is usually the biggest concern, but comprehensive Medicaid planning in Virginia should also address other assets like cash, investments, vehicles, and income. Some pointers:

Retirement accounts & income: In Virginia, IRAs and 401(k)s are countable assets unless in payout status (i.e. you’re taking required minimum distributions). If you’re approaching Medicaid need, work with a financial advisor to possibly convert these accounts to income streams (for example, through annuities or systematic withdrawals) so that they produce protected income for a spouse or meet Medicaid’s rules. Income of a healthy spouse is largely protected by the Minimum Monthly Maintenance Needs Allowance rules—meaning the healthy spouse can often keep their own income plus part of the Medicaid spouse’s income, up to the MMMNA cap (around $3,948/month in 2025). Ensure you maximize those allowances so the healthy spouse can afford to maintain the home and pay utilities, taxes, etc.

One car rule: Medicaid lets you keep one automobile exempt, so don’t sell the family car to spend down unless you have two and truly don’t need the second. In estate recovery, a car that passes to a joint owner or a designated heir usually isn’t a big target (cars depreciate and often have little value by that point), but technically if it ends up in the probate estate it could be sold to pay claims. Most families either retitle vehicles to the healthy spouse or use them up. This is usually a minor issue compared to real estate, but worth noting.

Burial funds: As mentioned earlier, Virginia Medicaid allows you to set aside funds for burial or have a prepaid funeral/burial plan that is irrevocable, without it counting against you. Doing this not only spares your family a future expense, it reduces your countable assets and keeps those funds out of the estate recovery equation (they won’t be there to recover). Similarly, a small life insurance policy (face value $1,500 or less) is exempt; larger policies may need to be surrendered or converted because their cash value could count. Always review your life insurance and burial plans as part of Medicaid pre-planning.

Avoiding probate: Even though Virginia Medicaid can recover from non-probate assets, it’s still generally wise to avoid probate for other reasons (speed, cost, privacy). Using beneficiary designations, joint ownership with survivorship, or POD/TOD designations on bank accounts and investments can streamline the inheritance process. Just remember, as noted, Medicaid’s claim can reach some of these non-probate transfers due to Virginia’s expanded recovery law. For example, if you have a bank account POD (“Pay on Death”) to your child, Medicaid could potentially claim against that account’s funds if your estate’s other assets can’t cover the Medicaid lien. An experienced attorney can structure your estate so that any Medicaid claim is minimized and your desired heirs still benefit as much as possible (for instance, by ensuring sufficient other funds to pay any Medicaid claim, or using trusts and other tools to control outcomes).

Schedule a Free Consultation—Secure Your Home and Peace of Mind

Every family’s situation is unique, and Medicaid’s rules are complex. The strategies that work best for protecting your home in Virginia will depend on factors like your health, marital status, timing, and assets. The stakes are high—your family home and life savings—so this isn’t a DIY area. Our firm’s Virginia Medicaid planning attorneys are here to help you navigate these rules with precision and care.

Don’t wait until a crisis hits. The earlier you start planning, the more options you have to protect your home from nursing home costs and estate recovery. Whether you’re exploring a trust, considering a caregiver child transfer, or need to qualify a spouse for Medicaid right now, we can guide you safely through Virginia’s requirements and craft a personalized plan.

Contact Prior Law today for a free consultation. We proudly serve clients in Waynesboro, Staunton, Augusta County, and throughout the Central Shenandoah Valley. Schedule your free consult now and take the first step toward peace of mind, knowing you’ve secured your family’s home from the reach of Medicaid estate recovery in Virginia.

FAQ

Will Medicaid put a lien on my house in Virginia?

No—unlike some states, Virginia does not place pre-death liens on a Medicaid recipient’s home. Federal law permits a lien only if an individual is permanently institutionalized with no intent to return home and has no spouse or dependent living there, but Virginia has opted not to impose these TEFRA liens. Instead, Virginia Medicaid waits until after death to recover costs from the estate. And even then, no estate recovery occurs if a surviving spouse is alive or a minor/blind/disabled child is living in the home. In short, your home is safe from Medicaid during your lifetime (and your spouse’s lifetime), absent fraud or extreme circumstances. The claim, if any, comes after death and only if no protected family member is eligible for an exemption.

Can Medicaid take the house after I die in Virginia?

Medicaid can seek repayment from your estate after you die, but certain conditions must be met. In Virginia, after a Medicaid recipient over 55 dies, DMAS will file a claim for the total Medicaid benefits paid on their behalf. This claim can be applied against assets in the estate, including the home. However, if there is a surviving spouse, or a child under 21 or permanently disabled of any age, Virginia cannot recover from the estate. Those family members are protected by law. If no protected survivor exists, Medicaid’s claim is limited to the value of the estate or the amount of benefits paid, whichever is less. In practical terms, the house may need to be sold by the estate’s executor to pay the Medicaid claim, but not if the heirs qualify for an undue hardship waiver. Virginia offers hardship waivers if recovery would cause substantial hardship (for example, inheriting the home is the heirs’ only shelter or livelihood). So, while Medicaid can take the house after your death by forcing a sale through the estate, it happens only if no exempt relatives are living and no waiver applies. Careful planning (e.g. transferring the home via exempt transfers or trusts) can prevent the home from being subject to recovery at all.

What is the “expanded estate recovery” in Virginia?

“Expanded estate recovery” means Virginia can recover against non-probate assets—not just assets that pass through a will. Under Virginia regulations, the recoverable “estate” includes any property you had legal title or interest in at the time of death. This expanded definition goes beyond the probate estate. For example, if you designate a payable-on-death bank account or record a Transfer on Death deed for your house, those assets bypass probate and go directly to beneficiaries. But in Virginia, they are still within reach of Medicaid’s claim if the rest of your estate is insufficient to pay the Medicaid debt. Similarly, jointly held assets with survivorship, life estates, and certain trusts can be pursued. Virginia is one of several states that elected this broader recovery authority permitted by federal law. The practical effect is that simply avoiding probate (through joint ownership or beneficiary designations) won’t fully protect an asset from Medicaid recovery in Virginia. You must use strategies like those discussed above (spousal transfers, caregiver child exemption, irrevocable trusts, etc.) to truly exempt assets from the reach of Medicaid’s estate recovery.

How do the caregiver child and sibling exemptions work?

These are transfer exceptions that allow you to give your home to certain family members without incurring a Medicaid penalty, and thus get the home out of your name before death. The Caregiver Child Exemption lets you transfer the house to an adult child who lived with you for at least two years immediately before you entered a nursing home and who provided care that kept you out of a facility during that time. If those conditions are met, Medicaid treats it as an allowable gift—no penalty, and since the home is now the child’s, it won’t be in your estate for recovery. The Sibling Exemption is similar: you can transfer the house to a sibling who co-owned and co-resided in the home for at least one year before you entered long-term care. Again, no transfer penalty would apply. It’s important to note these exemptions must be proven with documentation (e.g. proof of residency and care), and the transfers should be done before applying for Medicaid (ideally as soon as you know long-term care will be needed). These exemptions come from 42 U.S.C. § 1396p(c)(2) and Virginia follows the federal rule. When used properly, they effectively save the home: Medicaid can’t penalize the transfer and can’t recover from the child or sibling after your death because the home won’t be in your name at all.

What is the home equity limit for Medicaid in 2025?

For 2025, Virginia Medicaid has a home equity interest limit of $730,000 for single applicants (this is the minimum set by federal law). In other words, if your equity in your primary residence is above $730,000 and you have no spouse or exempt child living there, you may be ineligible for long-term care Medicaid unless you reduce that equity (for example, by taking a mortgage or reverse mortgage, or using a trust or other planning). Most homes in Virginia fall under this cap, but in areas with high property values it can be an issue. This limit is indexed for inflation and has risen from $688,000 a few years ago to $730,000 in 2025. Note: The home equity cap does not apply at all if you have a spouse living in the home, or a minor or disabled child living there—in those cases, the home is exempt regardless of value. Also, this cap is about eligibility (getting Medicaid); it doesn’t mean Medicaid will force a sale if you’re over the cap, but you’d have to find a way to become eligible (e.g., using a reverse mortgage to draw down equity or doing planning) before Medicaid will approve coverage. Once you’re on Medicaid, the value of the home doesn’t matter for estate recovery—a $300,000 home and a $1 million home are treated the same in estate recovery (Medicaid will claim up to what it spent, or the estate value).

Do I need to probate a will if I used a Transfer on Death deed or other beneficiary designations?

You might avoid probate, but Medicaid’s claim can still reach assets passed by TOD deeds or payable-on-death designations in Virginia. If you have a Transfer on Death (TOD) deed for your house, Virginia law allows the estate’s personal representative (executor)—or Medicaid directly—to enforce payment of creditor claims against that property up to one year after death. Essentially, the TOD deed keeps the home out of probate, but it doesn’t shield it from creditor claims if the probate estate lacks other assets to pay debts. Similarly, bank or investment accounts with POD beneficiaries pass outside the will, but Medicaid can require those beneficiaries to pay back an equivalent amount to satisfy the estate’s obligations (to the extent the probate estate is inadequate). So while tools like TOD deeds, beneficiary designations, and joint accounts are great for avoiding probate and simplifying transfers, they do not guarantee protection from Medicaid estate recovery in Virginia’s expanded recovery system. To truly protect those assets, you’d use the other strategies we discussed (e.g. transfer to spouse or caregiver child, irrevocable trust, etc.) rather than relying solely on avoiding probate.

Can an irrevocable trust protect my home from Medicaid in Virginia?

Yes—a properly drafted irrevocable Medicaid trust is one of the most effective ways to protect your home (and other assets) from both Medicaid eligibility spend-down and estate recovery. When you transfer your home into an irrevocable trust and wait out the 5-year lookback period, Medicaid will no longer count the home as your asset, and after you pass, the home is not considered part of your estate for recovery. The trust essentially owns the home, not you, so there’s nothing for Medicaid to recover against. Importantly, you can reserve the right to live in the home for your lifetime when setting up the trust, so your day-to-day life at home doesn’t change. You also maintain certain controls through the trust terms (for instance, the trust might allow the trustee to sell the house and buy a new one for you if needed). The major requirements are that the trust be truly irrevocable (you can’t have the power to simply take the assets back) and that you create and fund it at least five years before needing Medicaid. If done correctly, a Medicaid Asset Protection Trust 100% shields the home: you get Medicaid coverage when you need it, and when you die, the house passes to your heirs without a Medicaid lien. Many families prefer this over outright gifting the house to the kids, because the trust can preserve tax benefits (like stepped-up basis) and keep the home safe from the kids’ creditors during your lifetime. Setting up an irrevocable trust is more complex than other strategies and does involve legal fees, but it offers peace of mind that the home is secured for your family.