Property Ownership and Medicaid: Common Myths Debunked

This is the second of a four-part series exploring how to navigate the complex landscape of Medicaid eligibility with success.

Below, we explain how Medicaid and property ownership work specifically in Alabama.

One of the most common fears families have when applying for long-term care benefits is this: Does Medicaid take your house?

The short answer is no. Medicaid does not automatically take ownership of your home. However, property ownership plays an important role in eligibility, and states may seek reimbursement later through a lien or estate recovery process.

Understanding Medicaid and property ownership is essential when planning for long-term care.

Can You Own Property and Still Qualify for Medicaid?

Yes. In many cases, you can own property and qualify for Medicaid.

Eligibility is based on income and Medicaid asset limits, which vary by state. In Alabama, the countable asset limit for a single nursing home applicant is generally $2,000, excluding exempt property such as a primary residence. However, not all property counts toward those limits. Certain real estate holdings are considered exempt assets and do not disqualify you.

Under Medicaid rules for nursing home care, your primary residence generally won't be counted when determining if you qualify for benefits. But that doesn't mean the home is fully protected — Medicaid is required to place a lien on the home in most situations. The only exceptions are if a legally married spouse, a disabled child of any age, or a dependent minor child lives in the home.

2026 Home Equity Update

Home equity limits have increased significantly in the past several years. In 2026, the home equity interest limit set by CMS is approximately $752,000 in most states. Alabama is among the states that use the higher allowable limit, currently up to $1,130,000.

If your equity exceeds your state’s threshold, eligibility could be affected unless a spouse or other protected individual lives in the home.

What Property Is Considered Exempt vs. Excluded?

In Medicaid planning, exclusion and exemption are two terms that are frequently confused, but they do not mean the same thing. Understanding the distinction is vital for protecting your home and planning for the future.

Because a home can be excluded for eligibility while remaining subject to a lien, it’s important to look at the specific living situation of the claimant. Whether a spouse, child, or sibling resides in the home determines if the property reaches the "fully protected" status of an exemption.

Primary Residence

Your primary residence is often excluded when determining Medicaid eligibility, but the level of protection depends on your situation.

If you state an intent to return home, the property is excluded from the asset limit. However, this does not prevent a lien from being placed on the home.

If a spouse, minor child, or disabled child lives in the home, the property is both excluded and exempt from a lien. These are the only situations where the home is fully protected during your lifetime.

Regardless of your situation, the answer to “Can Medicaid take my house?” is no. Medicaid doesn’t recover assets, and it has no authority to take property. The State of Alabama is responsible for recovery.

However, exemption during eligibility doesn’t automatically eliminate estate recovery after death.

Spousal Protections

If one spouse enters a nursing home but the other continues living at home, Medicaid will not require the home to be sold. The value of the property is completely excluded, and no lien is required because the presence of a spouse creates an automatic exemption.

The spouse who remains at home is known as the “community spouse.” Federal spousal impoverishment protections are designed to prevent the community spouse from becoming financially unstable due to the cost of long-term care.

As long as the community spouse resides in the home, Medicaid can’t place a lien or pursue recovery.

Disabled or Dependent Children

If a disabled child (regardless of age) lives in the home, the property is excluded and will be exempt from a lien. If a dependent child lives in the home, the value is excluded, but a lien will be required. However, if there’s a minor child in the home, the value of the property will be excluded and exempt from a lien. States are prohibited from pursuing estate recovery while a surviving spouse, blind child, or disabled child remains alive.

Joint Ownership in Alabama

If a sibling or other family member has legal joint ownership and resides in the home, the property may qualify for an exclusion depending on state law. In Alabama, jointly owned home property is excluded if the sale would cause the other owner "undue hardship" by resulting in the loss of their primary residence.

A key nuance involves probate versus non-probate recovery. As of 2026, Alabama operates primarily as a “probate-only” recovery state, meaning the Alabama Medicaid Agency generally seeks recovery from assets that pass through the formal probate process. Assets that bypass probate—like property held in Joint Tenancy with Right of Survivorship (JTWROS)—pass automatically to the surviving owner and are currently shielded from estate recovery claims.

Property Listed for Sale

If non-exempt property is listed for sale at fair market value, it may be temporarily excluded during the application process. The property must remain actively listed and ultimately sell at market value to avoid penalties.

What Is a Medicaid Lien?

It’s important to note that a Medicaid lien is not the same as estate recovery. A Medicaid lien on property is a legal claim, not a transfer of ownership, and is placed during the recipient’s lifetime.

So, can Medicaid put a lien on your property? Yes, in certain circumstances.

When someone receives long-term care benefits, the state may place a lien on the home. This does not mean Medicaid owns the property. It means the state may seek reimbursement later.

A properly recorded Medicaid lien must be addressed before the property can be sold or refinanced. In some ways, it protects the recipient from improper transactions.

Importantly, the lien does not require payment while the recipient is alive and eligible.

How Medicaid Estate Recovery Works in Alabama

Federal law requires states to operate a Medicaid Estate Recovery Program (MERP), and Alabama participates in this program. In Alabama, estate recovery primarily applies to long-term care services..

After a recipient’s death, the Alabama Medicaid Agency may seek reimbursement from the person’s probate estate for benefits paid on their behalf.

Recovery is delayed if there is a surviving spouse. It’s also postponed if the recipient leaves behind a blind or permanently disabled child.

Hardship Waivers in Alabama

Alabama allows families to request a hardship waiver if estate recovery would cause undue hardship. These requests are reviewed on a case-by-case basis and require documentation.

Asset Verification and Transparency

Alabama uses advanced Asset Verification Systems (AVS) to confirm eligibility. These systems electronically review financial and property records, often going back up to five years. Full disclosure during the application process is essential to avoid penalties or delays.

How Much Can Medicaid Recover?

Recovery is limited by two factors:

1. The total amount Medicaid paid for long-term care
2. The value of the estate

Medicaid cannot recover more than the home’s value. It also can’t recover more than the total benefits paid.

For example: If the home is worth $200,000 and Medicaid paid $250,000 in benefits, the maximum recovery is $200,000. If Medicaid paid only $10,000 in benefits, recovery is capped at $10,000.

Mortgages, taxes, and certain administrative costs are typically paid before Medicaid’s claim.

What Happens in Different Scenarios?

• If the recipient returns home, the lien may be removed.
• If a spouse survives, recovery is delayed until after the spouse’s death.
• If children inherit the property, the lien must be resolved before sale or transfer.
• Heirs may continue living in the home for years without immediate payment, though the title cannot be transferred until the lien is satisfied.
• If the property is sold in Alabama, sale proceeds are used to satisfy valid claims in order of priority under state probate law.

Common Mistakes to Avoid

When navigating Medicaid and property ownership, families often:

• Transfer property below market value
• Misunderstand Medicaid asset limits
• Assume estate recovery is automatic and total
• Overlook probate versus expanded recovery rules
• Fail to carefully review lien documents

Before signing any lien agreement, verify the legal description, ensure proper notarization, confirm authorized signers, and retain copies of recorded documents.

When to Seek Professional Guidance

Property rules are among the most complex aspects of Medicaid rules for nursing home care. Between higher home equity limits, evolving estate recovery reforms, and advanced asset verification systems, careful planning is more important than ever. Expert guidance can make a significant difference.

At Rehab Select, our Medicaid specialists help families:

• Understand state-specific Medicaid asset limits
• Navigate Medicaid and property ownership rules
• Evaluate lien implications and estate recovery exposure
• Avoid transfer penalties
• Protect spouses and heirs

Applying for Medicaid is complex, but you don’t have to navigate it alone. If you or a loved one in Alabama is considering nursing home care and have concerns about property ownership, contact Rehab Select today to speak with our resident Medicaid expert and get clear, personalized guidance for your situation.

FAQs About Medicaid and Property Ownership