20 May Can Medicaid Take My House in Illinois?

Can Medicaid Take My House in Illinois?

Protecting Your Family Home Through Expert Medicaid Planning

By Martin Fogarty, Founder of ElderSmart

For many Illinois families I’ve counseled over the past three decades, the family home represents far more than just an asset on a balance sheet, it’s the cornerstone of financial security, generational wealth, and treasured family memories. But when long-term care becomes necessary, often through Medicaid-funded nursing home care, families are left asking a critical question that I hear regularly in my practice:

Can Medicaid take your house in Illinois?

The answer requires nuance and understanding of both Illinois and federal law. 

In short: Medicaid can’t take your house while you’re alive in many situations, but your home can be at risk after death through the state’s Medicaid Estate Recovery Program. With proper planning, the kind we develop for families every day at ElderSmart, you can shield your home from Medicaid and pass it on to your loved ones.

I founded ElderSmart after witnessing my own father’s journey through the long-term care system. That experience taught me that protecting the family home isn’t just about preserving wealth, it’s about honoring a lifetime of hard work and maintaining family stability during vulnerable times.

In this comprehensive guide, we’ll explore:

• When Medicaid considers your home exempt
• When your home becomes vulnerable to recovery
• How Illinois specifically handles estate recovery
• Proven tools to protect your home, including specialized trusts and exemptions
• Common family scenarios we see and their implications
• Step-by-step planning recommendations

Why Is the Home So Important in Medicaid Planning?

When applying for Medicaid long-term care in Illinois, your eligibility is based on strict income and asset limits. Most assets must be “spent down” before Medicaid will step in, but thankfully, the primary residence is treated differently.

Illinois, like other states, excludes the value of your home up to a certain equity limit (currently $713,000 in 2025) as long as it meets one or more criteria:

• You live in the home
• You intend to return home from a nursing facility
• Your spouse or a dependent lives in the home

This means that for many of our clients, Medicaid won’t require them to sell their home to qualify for benefits.

But this is precisely where many families stop planning, and that’s where problems begin. In my decades of helping Illinois families navigate elder care, I’ve seen too many homes lost simply because planning stopped too soon.

The Hidden Risk: Medicaid Estate Recovery in Illinois

Even if your home is safe while you’re alive, Illinois can pursue reimbursement for care costs after your death through MERP (the Medicaid Estate Recovery Program).

How Estate Recovery Works in Illinois:

If you received Medicaid long-term care services at age 55 or older, the state is required by federal law to seek repayment from your estate, and often, your home is the largest or only estate asset available for recovery.

In Illinois, and this is crucial, estate recovery is limited to assets that go through probate. This single detail forms the foundation of many of our most effective planning strategies at ElderSmart. If your home is titled in your name alone and you die without an estate plan, the home may go through probate and be claimed by the state.

When MERP Doesn’t Apply:

• You are survived by a spouse
• You have a child under 21, or a child who is blind or disabled
• Your home avoids probate (e.g., through a trust or special deed)
• The recovery would cause undue hardship to heirs (though this is rarely granted)

As I often tell families in our workshops, “The rules that protect you during life don’t automatically protect your heirs after death.”

Common Illinois Family Scenarios: What Happens to the Home?

Let me walk you through scenarios I see regularly in my practice, along with recommendations I typically provide:

✅ Single, living in the home

Your home is exempt for Medicaid eligibility as long as your equity is below $713,000. But upon death, if no exempt heirs remain and no planning was done, Medicaid can recover costs via estate recovery.

Martin’s Recommendation: Consider transferring the home to a Medicaid Asset Protection Trust at least five years before needing care. This removes it from your estate while allowing you to maintain the right to live there for life.

✅ Single, moving into a nursing home

If you sign a written “Intent to Return Home,” your home remains exempt. However, if the stay is permanent and the home eventually goes through probate, MERP applies.

Martin’s Recommendation: An intent to return statement buys time, but isn’t a long-term solution. We typically recommend exploring the caregiver exemption if applicable, or setting up a trust if there’s sufficient time before needing Medicaid.

✅ Single, with adult children living in the home

The home may be exempt if the child is disabled or blind. If not, it may be at risk post-death, unless planning strategies like the Caregiver Exemption or a trust are used.

Martin’s Recommendation: If a child has been providing care that kept you out of a facility, we can document this carefully and potentially transfer the home penalty-free through the caregiver child exemption.

✅ Married, one spouse in a nursing home

The community spouse (the one not receiving care) may remain in the home and the house remains exempt. However, without planning, the home could become vulnerable after the second spouse dies if it passes through probate.

Martin’s Recommendation: We typically recommend ensuring the home is titled solely in the community spouse’s name, and then creating a trust or other transfer strategy to protect it after the community spouse passes away.

✅ Married, surviving spouse remains in the home

While the surviving spouse is alive, MERP is paused. But after their death, Illinois can seek recovery unless the home is transferred properly or held in a trust.

Martin’s Recommendation: The surviving spouse should establish a comprehensive estate plan that keeps the home out of probate, potentially through an irrevocable trust or transfer-on-death instrument.

✅ Home jointly owned with siblings or other heirs

Without careful titling or use of trusts, your portion of the home may still go through probate and be subject to MERP.

Martin’s Recommendation: Joint ownership alone isn’t sufficient protection. We recommend restructuring ownership through right instruments or trusts to ensure the entire interest avoids probate.

Key Exemptions That Can Protect Your Home in Illinois

There are legal pathways to safely transfer your home without violating Medicaid’s rules, if done early and correctly. At ElderSmart, we’ve helped hundreds of Illinois families implement these strategies successfully.

1. Medicaid Asset Protection Trust (MAPT)

An irrevocable trust can shield your home from Medicaid and from probate. Once transferred, the home no longer belongs to you, so it’s no longer subject to estate recovery.

• Must be set up at least 5 years before applying for Medicaid
• You retain the right to live in the home for life
• Children can be named beneficiaries
• Keeps the home out of probate
• Provides additional asset protection benefits

This is one of the most powerful tools we recommend at ElderSmart. Imagine a family in Springfield who transferred their home to a MAPT seven years before the father needed nursing care. When he passed after three years in the facility, their $320,000 home would pass to his children completely protected from Medicaid recovery.

2. Caregiver Child Exemption

You may transfer the home to an adult child without penalty if:

• They lived with you for at least 2 years before you entered care, and
• They provided care that delayed your institutionalization

This exemption recognizes the real-life support adult children often provide, but must be documented and timed correctly.

Consider a daughter in Rockford who could receive her mother’s home through this exemption. By gathering medical records, caregiver logs, and statements from physicians, it could be demonstrated that her in-home care had delayed nursing home placement by at least 18 months. The transfer would be approved without any penalty period.

3. Sibling Exemption

If a sibling:

• Lived in the home for at least 1 year before you moved into care, and
• Has ownership interest in the home

Then you may transfer the home to them without violating the look-back rule. Again, timing and documentation matter tremendously here.

4. Spousal Transfer

You can transfer your home to your spouse at any time with no penalty, and we often recommend ensuring the home is titled solely in the community spouse’s name to avoid complications later.

As I tell clients, “Medicaid rules don’t prevent you from being fair to your spouse.” This transfer should be done as part of a broader plan that addresses what happens after both spouses pass away.

Other Tools to Avoid Medicaid Recovery

Keep the Home Out of Probate

Illinois only recovers costs from assets that go through probate. By avoiding probate, you avoid estate recovery.

Options include:

• Irrevocable trusts
• Joint tenancy with rights of survivorship
• Transfer-on-death instruments (if applicable)
• Lady Bird deeds (not widely used in Illinois but worth exploring)

At ElderSmart, we evaluate each client’s unique situation before recommending which probate-avoidance tool fits best. For example, a transfer-on-death instrument might work for a widow in Chicago who wants the simplest solution possible, while a family with complex dynamics in Peoria might need a comprehensive trust solution.

✅ Don’t Sell Without Planning

Selling the home while on Medicaid can trigger ineligibility, as the proceeds become countable assets. You must then spend them down before reapplying.

Families often come to elder law attorneys after another advisor suggested selling their home, only to discover too late that this created a financial crisis.

Can Medicaid Place a Lien on Your Home in Illinois?

Illinois is not currently known for aggressive use of TEFRA liens (pre-death liens), but the state can file a claim against the estate if the home enters probate. Unlike some other states, Illinois focuses primarily on post-death estate recovery.

However, as state budgets tighten, enforcement of estate recovery has become more consistent. I’ve noticed a marked increase in recovery efforts by the state over the past five years, making proper planning more important than ever.

 

Frequently Asked Questions

Can I just give my house to my kids?

No, not without risk. A gift like this violates the 5-year look-back period and can trigger Medicaid ineligibility. Consider a MAPT or Caregiver Child Exemption instead.

As I often tell families at our workshops, “What seems like common sense isn’t always what works under Medicaid rules.”

What happens if I sell my house while on Medicaid?

The proceeds are no longer exempt. You’d be over the asset limit and lose coverage until the money is spent down. Selling is rarely advisable without a plan.

Consider a situation where someone sells their home without consulting an elder law attorney first, which could result in a 6-month period of ineligibility during which the family would have to pay privately for care—an expensive lesson.

Is Illinois a probate-only recovery state?

Yes. This means if your assets, including your home, avoid probate, the state cannot recover from them.

This single detail forms the foundation of our most effective planning strategies at ElderSmart.

Can I keep my house if I go into a nursing home?

Yes, under certain conditions. Your home is exempt if you plan to return or if your spouse, dependent, or disabled child lives there.

However, keeping the house exempt during your lifetime is only half the battle; protecting it after death requires additional planning.

What if I pass away and my adult child is living in the home?

If they are disabled or meet the caregiver exemption, the home may be safe. Otherwise, it may be subject to estate recovery unless planning was done in advance.

At ElderSmart, we’ve helped many families document caregiver arrangements to qualify for this important exemption.

 

The ElderSmart Approach: Education, Clarity, and Well-Being

When I founded ElderSmart after my father’s battle with Alzheimer’s, I committed to three core principles that guide our work with every family:

Education: We believe informed families make better decisions. That’s why we hold monthly workshops across Illinois and provide clear, practical guides like this one.

Clarity: Legal jargon shouldn’t obscure your options. We translate complex Medicaid rules into plain English and provide step-by-step roadmaps for every client.

Well-Being: Your family’s emotional and financial health matters to us. Our strategies consider not just legal protection, but family dynamics and long-term security.

Protecting Your Home & What Matters Most

Your home represents far more than bricks and beams – it’s a lifetime of effort, memories, and family security.

Yes, Medicaid can take your house in Illinois, but only if you let it.

With proper planning, the kind we develop daily for Illinois families, you can live with peace of mind knowing your family home is protected. At ElderSmart, we specialize in helping Illinois families plan for care, preserve assets, and keep what matters most.

I’ve seen firsthand the relief on clients’ faces when they realize their home can be protected. Knowing your Mom’s house is safe can feel like you’ve preserved part of her legacy.

Don’t wait until crisis strikes. The most effective planning happens well before care is needed. Whether you’re planning ahead or facing an immediate need, we’re here to help.

 

Contact ElderSmart today for a confidential consultation. Let’s protect your home and your legacy.

Martin Fogarty is the founder of ElderSmart and has spent over three decades guiding Illinois families through complex elder care decisions.

Our approach combines deep legal expertise with genuine compassion, earned through both professional experience and his family’s personal journey through long-term care challenges.

 

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