Vermont Medicaid Estate Recovery (DVHA) 2026

Vermont Medicaid estate recovery runs through probate court. 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 from the estate as filed there, 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). An estate under $2,000, an undue hardship, and the homestead exemption each stop or limit recovery, and property that passes outside probate is not part of the estate as DVHA's notice defines it; a surviving spouse or a protected child defers recovery, 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 seek estate recovery in set cases. The mandate is in 42 U.S.C. 1396p(b), enacted by the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993). It bars recovery of assistance correctly paid except where it requires the state to seek it, including from the estate of a 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: a nursing-facility or other medical-institution inpatient whom the state determined, after notice and a chance for a hearing, could not reasonably be expected to be discharged and return home.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, the claim reaches the estate as filed in probate court, and several protections can defer or block it.1

DVHA's own notice adds a line worth reading if the prospect of a claim has you weighing whether to use Medicaid at all: "We are not encouraging you to withdraw from Medicaid's payment of these services. We believe most people will find it is better to have Medicaid." It suggests talking the decision through with your worker, a family member, a lawyer, or an advocate from the Area Agency on Aging.1

The probate-estate definition. 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 requires a state's estate definition to include the probate estate and lets a state, at its option, expand it to non-probate assets such as joint tenancy, life estates, and living trusts.1 DVHA's published notice describes only the probate estate, so assets that transfer outside probate fall outside the estate as that notice defines it.1

Vermont has both a special income level and a medically needy path for long-term care. An applicant whose income or resources exceed the limits may still qualify as medically needy by incurring enough expenses to bring income, or resources, down to the protected income level and resource maximum. A nursing-facility resident keeps a personal needs allowance of $79.93 per month and pays income above the allowed deductions 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 Federal law's carve-out for Medicare cost-sharing paid on behalf of Medicare Savings Program enrollees applies only to a state's optional recovery of other state-plan items; it is not a general exclusion, and long-term-care payments remain subject to recovery.1

What the State Can Recover From

DVHA's notice defines the recoverable estate as the property filed in probate court. The question for most families is whether the home and accounts pass through probate.1

Assets in the estate DVHA's notice describes (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 outside that estate (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

Federal law lets a state expand its estate definition beyond probate at its option under 42 U.S.C. 1396p(b).1 DVHA's notice describes the probate estate only, and no source we rely on says whether Vermont has formally declined that option, so a family counting on a non-probate asset staying clear should confirm the current rule with DVHA or a Vermont elder-law attorney.1

A note of caution on planning deeds: a family considering a deed transfer, such as an enhanced life estate ("Lady Bird") deed, to keep a home out of probate should work with an elder-law attorney who practices in Vermont before relying on it.

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, and undue hardship generally. DVHA will not seek recovery from estates under $2,000 or when it determines recovery would cause an undue hardship (Medicaid Rule 7108.3). That hardship power is not limited to the homestead conditions below, so a family facing real hardship from a claim can ask DVHA to waive it.1

The Vermont Homestead Undue-Hardship Exemption

Vermont's most consequential family protection is the homestead exemption in 33 V.S.A. § 1906a and DVHA's Medicaid Rule 7108.3. Under the rule, at any time before the probate estate closes, an heir may assert that recovery against the homestead would be an undue hardship, and DVHA exempts the home when one or more of three conditions is established. The statute, covered after them, is the higher authority and in one respect broader.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). Conditions A and B stand on residency and caregiving alone; Condition C's value and heir tests do not apply to them. 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 home is exposed.1

The governing statute, 33 V.S.A. § 1906a, frames the protection without any home-value ceiling, and DVHA's Form 204REC states it the same way. Where the rule's $250,000 test and the statute diverge, the statute is the higher authority: "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. Each relies on DVHA's notice defining the estate as the property filed in probate court, so confirm the current rule with a Vermont elder-law attorney, and execute any move 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. The two years of residence must come immediately before institutionalization, so two years of shared living at some earlier point does not qualify, and the exception turns on the state's determination rather than applying automatically.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.