Vermont Medicaid Estate Recovery (DVHA) 2026

Vermont Medicaid estate recovery is probate-only. After a member's death, the Department of Vermont Health Access (DVHA) files a claim in probate court to recover what Medicaid paid for long-term care, but only against property that passes through the probate estate, and only for a member who was 55 or older when they received nursing facility or home-based long-term-care services (or who was permanently institutionalized at any age). Property that passes outside probate, an estate under $2,000, and the homestead undue-hardship exemption each stop or limit recovery; a surviving spouse or a protected child defers it, holding the claim off until the spouse dies or the child is no longer protected.1

What Vermont Medicaid Estate Recovery Is

Federal law requires every state Medicaid program to operate an estate recovery program. The mandate is in 42 U.S.C. 1396p(b), enacted by the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), and it requires states to recover from the estate of a deceased member who was 55 or older when they received nursing facility services, home and community-based services, and related hospital and prescription-drug services, and from a member of any age who was permanently institutionalized.1 In Vermont, the Medicaid program is administered by the Department of Vermont Health Access (DVHA), and long-term care is delivered through the Choices for Care program.

How it works: after a qualifying member dies, DVHA files a claim in probate court to recover what Medicaid paid for that member's long-term care. The official DVHA estate-recovery notice (Form 204REC) states the rule directly: "The Department of Vermont Health Access (DVHA) will file a claim in probate court to recover Medicaid benefits from the estate of an individual who dies on or after January 1, 1994, and who was 55 years or older when he or she received nursing facility services or home-based long-term care services paid for by the Medicaid program."1

Two points matter at the outset. First, estate recovery happens only after death: DVHA files its claim in probate court once the member has died, so estate recovery itself never takes a home from a living member. Second, Vermont recovers from the probate estate only, which means most families find that one of several protections applies.

The probate-only definition. Vermont defines the recoverable estate narrowly. Form 204REC specifies that "an estate shall include all real and personal property and other assets that are included in the estate when it is filed in the probate court."1 Federal law lets a state expand its estate definition to non-probate assets such as joint tenancy, life estates, and living trusts, but Vermont has not adopted that expanded-estate option.1 Assets that transfer outside probate are therefore beyond the reach of Vermont's recovery program.

Vermont is a medically needy spend-down state and does not require a Miller Trust. A member whose income exceeds the protected income level qualifies by spending down excess income on incurred medical and care costs. A nursing-facility resident keeps a personal needs allowance of $79.93 per month and contributes income above the protected allowances toward the cost of care.2

Who Is Subject to Vermont Medicaid Estate Recovery

Vermont Medicaid estate recovery applies to a member who:

1. Was 55 or older at the time they received Medicaid-paid long-term services, or was permanently institutionalized at any age, and
2. Received nursing facility services, home-based long-term-care services (Choices for Care), or related hospital and prescription-drug services.1

A member who received only routine Medicaid medical coverage, with no long-term-care component, is not subject to recovery. The amount DVHA seeks "is limited to the Medicaid payments paid on or after January 1, 1994, for nursing facility services, home-based long-term care services, and related hospital and prescription drug services."1 Medicaid payments for Medicare cost-sharing made on behalf of Medicare Savings Program enrollees, such as Medicare premiums, deductibles, coinsurance, and copays, are excluded from estate recovery.1

What the State Can Recover From

Vermont's recovery reaches only the probate estate. The question for most families is whether the home and accounts pass through probate.1

Assets subject to recovery (they pass through probate):

• Real estate titled solely in the deceased member's name, with no survivorship interest
• Bank accounts in the member's name alone, with no payable-on-death beneficiary
• Investment accounts with no transfer-on-death beneficiary named
• Personal property and vehicles individually titled

Assets not subject to recovery (they pass outside probate):

• Real estate held in joint tenancy with right of survivorship
• Accounts with a payable-on-death (POD) beneficiary designation
• Investment accounts with a transfer-on-death (TOD) designation
• Life insurance proceeds paid to a named beneficiary other than the estate
• Retirement accounts (IRA, 401(k)) with a named beneficiary
• Property held in a properly drafted and funded irrevocable trust

Because Vermont uses the probate-only estate definition rather than the expanded definition authorized at the state's option under 42 U.S.C. 1396p(b), non-probate assets remain outside recovery's reach.1

A note of caution on planning deeds: enhanced life estate deeds, sometimes called "Lady Bird" deeds, are not clearly recognized under Vermont law, and Vermont practitioners do not uniformly use them. A family considering a deed transfer to keep a home out of probate should work with an elder-law attorney who practices in Vermont rather than relying on an instrument whose status here is unsettled.

Who Is Protected From Recovery

Vermont law sets out protections that block or defer recovery. Several apply automatically once DVHA is notified of the relationship.

Surviving spouse and protected children. Form 204REC states the rule: "Estate recovery will be sought only after the death of the individual's surviving spouse, if any, and only at a time when the individual has no surviving children under age 21, blind, or permanently and totally disabled as defined by the Social Security Administration."1 This mirrors the federal mandate that recovery may be made only after the death of a surviving spouse and only when there is no surviving child under 21 and no child who is blind or permanently and totally disabled.1

• Surviving spouse: DVHA does not pursue recovery while the member's spouse is alive. The spouse can be any age.
• Child under 21: Recovery is deferred while any surviving child of the member is under age 21.
• Blind or permanently and totally disabled child: If the member's child meets the Social Security Administration disability standard, recovery is deferred while that child is alive. The disability standard is defined by the Social Security Administration.1

Estates under $2,000. DVHA will not seek recovery from estates valued under $2,000.1

The Vermont Homestead Undue-Hardship Exemption

Vermont's most consequential family protection is the homestead undue-hardship exemption under Medicaid Rule 7108.3 and 33 V.S.A. § 1906a. At any time before the probate estate closes, an heir may assert that recovery against the homestead would be an undue hardship. DVHA exempts the home when one or more of three conditions is established.1

Condition A, the sibling exemption. A sibling who lived in the home continuously for at least one year immediately before the member began receiving long-term-care services qualifies the homestead for exemption. An affidavit is required.1

Condition B, the caregiver-child exemption. A son or daughter who lived in the home continuously for at least two years immediately before the member began receiving long-term-care services, and who provided care that allowed the member to remain at home, qualifies the homestead for exemption. An affidavit is required.1

Condition C, the modest-homestead and income test. The home is exempt when its fair market value is less than $250,000, a sibling or lineal heir (a direct descendant such as a child or grandchild) will inherit it, and that heir either has gross family income below 300 percent of the federal poverty level or demonstrates that significant services or financial support allowed the member to avoid long-term care or delay it by at least six months. Either branch satisfies the third element; you do not need both. If the home is worth more than $250,000, the rule does not simply drop the exemption: it provides that "the first $250,000.00 shall be subject to the provisions of rule 7018.3," which is Vermont's undue-hardship rule (numbered 7108.3 elsewhere in DVHA's own materials). Because the rule's own text is ambiguous on exactly how the excess is handled, a family with a home above $250,000 should still file the exemption request and ask the DVHA Coordination of Benefits Unit how the department applies it, rather than assume the whole home is exposed.1

The governing statute, 33 V.S.A. § 1906a, frames the same protection: "No recovery of medical expenses shall be made under this subchapter against a homestead, provided that the homestead would pass to one or more lineal heirs or siblings of the decedent who either have income below 300 percent of the federal poverty level or who have contributed significantly, monetarily or otherwise, to the decedent so as to allow the decedent to delay or avoid nursing home placement." The statute also provides that recoveries owed to the federal government on homesteads valued between any federal maximum-equity exemption and $125,000 are paid through State general funds when the caregiving or poverty standards are met and the probate estate was opened after June 30, 2000.1

The forms. To claim the exemption, an heir files the DVHA 13 Homestead Exemption Request Form, together with the DVHA 14 Caregiver Exemption Request Form or the DVHA 15 Household Income Below 300 Percent of the Federal Poverty Level Exemption Form, depending on which condition applies.1

How to Respond If You Receive a Claim

If your family member received Medicaid-paid long-term care and has died, DVHA may file a recovery claim in probate court. Work through these steps:

Planning Options to Reduce Exposure

For Vermont families thinking ahead, several planning moves can reduce or eliminate estate-recovery exposure. All work because Vermont recovers from the probate estate only, and all should be executed well before institutionalization or a Medicaid application.1

1. Joint tenancy with right of survivorship. Real property or accounts held jointly pass automatically to the surviving co-owner outside probate.
2. Beneficiary-designated accounts. IRAs, 401(k) accounts, life insurance, and POD/TOD bank and brokerage accounts pass to the named beneficiary outside probate. Reviewing and updating beneficiary forms is essentially free protection.
3. Properly drafted irrevocable trusts. A correctly structured and funded irrevocable trust holding the home keeps the asset out of the probate estate at death. The trust must be drafted by experienced elder-law counsel and funded well before any Medicaid application.
4. Spend-down with a care strategy. Structured spend-down on the member's own care, home repairs, a replacement vehicle, and prepaid funeral and burial arrangements reduces countable assets and probate exposure at the same time.

The lookback caveat. Asset transfers before a Medicaid application fall under Vermont's 60-month (five-year) look-back, separate from estate recovery. An uncompensated transfer within that window can create a penalty period of ineligibility.2 One federal exception is relevant here: under 42 U.S.C. 1396p(c)(2)(A)(iv), transferring the home during life to a son or daughter who resided there for at least two years immediately before the member became institutionalized, and who, as determined by the state, provided care that permitted the member to stay at home rather than in a facility, does not trigger a transfer penalty. Both the two-year residency and the care it enabled must sit immediately before institutionalization; two years of shared living at some earlier point does not qualify.1 Any lifetime transfer should be reviewed with an elder-law attorney before it is made.

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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.