Michigan Medicaid Estate Recovery 2026: House & Estate Guide

Michigan Medicaid estate recovery reaches only assets that pass through probate after a recipient dies. That means a home transferred by a Lady Bird deed, a jointly owned account, or a payable-on-death designation generally falls outside the state's reach. Knowing which assets go through probate and which do not is what decides whether a family keeps the home or loses it to a state claim.1

In This Guide

• What Federal Law Requires
• What Michigan Can and Cannot Recover
• The Five Categorical Protections
• Lady Bird Deeds in Michigan
• The Caregiver-Child Lifetime Transfer
• Michigan's Transfer Penalty Divisor
• How the Recovery Process Works
• Hardship Waivers
• Two Worked Examples

What Federal Law Requires

Here is how the rule works. Every state Medicaid program must run a Medicaid Estate Recovery Program (MERP) under 42 U.S.C. § 1396p(b), a requirement Congress added in the Omnibus Budget Reconciliation Act of 1993 (OBRA-93). The federal floor requires states to seek recovery in three situations:

• A recipient who was 55 or older when they received nursing facility services, home- and community-based services (HCBS), and related hospital and prescription drug services. A state may also choose to recover for other Medicaid services such a recipient received, apart from Medicare cost-sharing.
• A nursing facility or other medical-institution inpatient whose home the state may place a lien on, because the state has determined, after notice and a chance for a hearing, that the person cannot reasonably be expected to return home.
• A person who received benefits under a long-term care insurance policy for which assets were disregarded, with an exception for people covered by a qualified state long-term care partnership.2

A state may go further by adopting an "expanded estate" definition that reaches assets passing outside probate, such as joint tenancy, life estates, and living trusts. Michigan does not elect that expansion. Michigan uses the federal-default probate-only definition, which means a large share of a typical family's wealth never comes within reach.2,1

What Michigan Medicaid Estate Recovery Can and Cannot Recover

MDHHS can recover only from assets that pass through the probate process after the Medicaid recipient's death. In practice, that distinction is the whole game: an asset titled so that it skips probate skips recovery along with it.1

Michigan's probate-only stance means jointly held property and accounts with beneficiary designations can pass to heirs without MDHHS involvement at all.

The Five Categorical Protections

Even when an asset does pass through probate, MDHHS defers recovery while any of these conditions exist. A deferral postpones the claim; it does not cancel it. The first three come from the federal floor at 42 U.S.C. § 1396p(b)(2).2 Federal law ties the sibling and caregiver protections to a home carrying a state lien, but MDHHS separately defers recovery for both:1,2

1. A surviving spouse is alive. Recovery is deferred, not permanently waived. After the surviving spouse's death, the claim can revive if no child under 21 and no blind or disabled child is living.
2. A child under age 21 is alive.
3. A blind or permanently and totally disabled child of any age is alive.
4. A sibling with an equity interest in the home who lived there for at least one year immediately before the recipient's admission to a medical institution, and who still lives there.
5. A caregiver, such as an adult child, who lived in the home and provided care for at least two years immediately before the recipient's admission to a medical institution, where that care let the recipient live at home rather than in an institution, and who still lives there.1

Families relying on the sibling or caregiver-child protection should gather contemporaneous records early: utility bills, voter registration, and written statements from physicians or care coordinators documenting the level of care provided. These are the documents that turn a claim of residence into a provable one.

Lady Bird Deeds in Michigan

Michigan recognizes Lady Bird deeds (also called enhanced life estate deeds), a way to transfer a home outside probate. Because Michigan's estate recovery reaches only probate assets, a home that passes by Lady Bird deed falls outside the state's reach. A properly executed and recorded Lady Bird deed lets the property owner do two things at once:1

• Retain full control of the home during their lifetime, including the right to sell, mortgage, or revoke the deed without the remainderman's consent.
• Transfer the home automatically at death to the named remaindermen, outside probate.

Because the property passes outside probate, the MERP claim cannot reach it. The home also remains exempt from Michigan's Medicaid asset limit during the owner's lifetime, provided the equity stays at or below $752,000 in 2026 and the other exemption conditions are met.3

Lady Bird deeds should be drafted by a Michigan-licensed attorney. The State Bar of Michigan's Elder Law and Disability Rights Section can help connect families with qualified counsel (see the resources below).

The Caregiver-Child Lifetime Transfer Exception

There is a second caregiver-child rule that works during the parent's lifetime, and it is easy to confuse with the post-death protection above. Under 42 U.S.C. § 1396p(c)(2)(A)(iv), transferring the home to a qualifying caregiver child does not trigger a transfer penalty under the 60-month look-back. To qualify:2,3

• The child must have lived in the home for at least two years immediately before the applicant entered institutional care.
• The state must determine that the child provided care that permitted the applicant to remain at home rather than enter a facility; the exception is not automatic.2 Michigan's rule (BEM 405) requires that care to be documented in a statement from a physician (M.D. or D.O.), and it also covers a parent approved for waiver services.1

This lifetime transfer differs from the post-death caregiver-child protection in (b)(2)(B)(ii).2 The lifetime transfer removes the property from the applicant's estate permanently, while the post-death rule only defers a claim. Federal law describes the transfer as one made by an institutionalized individual, so what has to come before admission is the child's two years of living there and giving care, not the deed.2

Michigan's Transfer Penalty Divisor

If assets are transferred for less than fair market value within the 60-month look-back period, Michigan calculates a penalty using a transfer penalty divisor of $12,216 per month for a 2026 baseline date, the state's average monthly private-pay long-term care cost. The divisor is the one for the person's own baseline date, not the current year: BEM 405 uses $11,842 for a 2025 baseline date.1

Not every transfer is penalized. BEM 405 does not count a transfer to a spouse, to a blind or disabled child of any age, or into an irrevocable prepaid funeral contract, and the home can go to a spouse, a child under 21, a blind or disabled child, a qualifying caregiver child, or a co-owning sibling who meets the residency rule.1

Here is how the math plays out: a $100,000 uncompensated transfer divided by $12,216 gives 8 full months, and BEM 405 then multiplies the leftover fraction of a month (about 0.19) by 30, adding roughly 5.6 days.1 The result is a penalty period, not a loss of Medicaid: Medicaid won't pay for nursing home care, MI Choice or PACE waiver services, home help, or home health during it, but it still pays for other covered services.3 Under federal law the penalty starts on the later of the first day of the month of the transfer or the date the person is eligible for Medicaid and would otherwise be receiving institutional-level care, which is why planning around the look-back period should happen well in advance of any anticipated need.4

How the Michigan Medicaid Estate Recovery Process Works

After a Medicaid recipient dies, MDHHS sends a Notice of Intent to the personal representative or estate contact. Note the date it was sent: the 60-day window for a hardship application runs from it.1

This is often the first the family hears of estate recovery, and it arrives in the weeks after a loss, when no one wants to be sorting deeds and account statements. Take it one step at a time. The notice is a starting point, not a bill, and a careful response is what protects the people the law already means to protect. The steps below are the path it follows.

One practical rule matters above the rest: do not distribute estate assets before confirming the MERP status with MDHHS. Contacting an elder law attorney promptly after the notice arrives is worth it for any estate that involves real property.

Hardship Waivers

Federal law at 42 U.S.C. § 1396p(b)(3) requires every state to set up procedures to waive recovery when it would work an undue hardship.2 In Michigan, MDHHS defers recovery for undue hardship when the estate property is the survivors' main income-producing asset, such as a family farm or business whose income is limited, or is a home of modest value, which BAM 120 defines as one worth 50 percent or less of the average home price in its county as of the date of death. The applicant must also meet a means test: household income below 200% of the poverty level and total household resources of $10,000 or less. BAM 120 treats these waivers as temporary.1

To apply, file with MDHHS no later than 60 days from the date it sends the Notice of Intent; if the application is denied, you can request a hearing within 60 days of the notice of case action.1 Free help is available through Michigan Legal Help and local legal aid organizations (see the resources below).

Two Worked Examples

The figures below are hypothetical and shown only to illustrate how recovery works. They are not a real case and not a prediction of your own result.

Example 1: the family that planned. A single Michigan man, age 81, spent three years in a nursing facility on Medicaid. Total LTSS expenditures came to $150,000. He owned a home worth $175,000 and had executed a Lady Bird deed naming his son as remainderman, and his checking account named his son as the payable-on-death beneficiary. At death, the home transfers to his son outside probate through the Lady Bird deed, and the checking account passes directly through the payable-on-death designation. No probate estate is opened, so MDHHS has no probate assets to reach. Recovery: $0.1

Example 2: the same estate, no planning. Same man, same $150,000 in care, but no Lady Bird deed and no payable-on-death designation. Both assets now pass through probate. MDHHS files a claim for the full $150,000 against an estate worth $185,000, and after the claim and probate costs, the son inherits only the remainder.1

The difference between $0 and a $150,000 claim, on the same estate and the same amount of care, comes down to paperwork prepared years before anyone needed it.1

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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.