Can Medicaid Take My Parents' House in Vermont?

The short answer: Medicaid cannot take your parents' house while they are alive. The longer answer involves understanding what happens after death, and the specific tools Vermont law provides to protect the home permanently.

This is the question that keeps adult children awake at night. The family home is often the largest asset your parents own—and the most emotionally charged. Vermont's rules offer more protection than most families realize, but only if you understand how they work and act before it's too late.

During Your Parent's Lifetime: The Home Is Protected

While your parent is alive and receiving Medicaid through Choices for Care, the primary residence is an exempt asset. Medicaid cannot force a sale, place a lien, or seize the property. This protection applies as long as one of these conditions is met:

• Your parent declares an intent to return home (Form 216HU) and home equity stays below $752,000
• A spouse continues to live in the home (no equity cap applies)
• A minor child, or a child who is blind or permanently disabled, lives in the home

Even if your parent moves to a nursing home permanently, the home remains exempt as long as they sign the intent-to-return statement. The state cannot force them to sell the house to pay for care.

After Death: Estate Recovery Is the Real Risk

The threat comes after your parent dies. Vermont's Medicaid Estate Recovery Program requires DVHA to seek reimbursement for long-term care costs from the deceased recipient's probate estate.

Here's the critical detail: Vermont is a probate-only recovery state. DVHA can only claim assets that pass through probate court. If the house transfers to heirs through a mechanism that bypasses probate, DVHA has no legal claim to it.

Four Ways to Protect the Home

1. Lady Bird Deed (Enhanced Life Estate Deed)

Vermont is one of only a handful of states that recognizes Lady Bird deeds. This deed lets your parent retain full ownership and control during their lifetime—including the right to sell, mortgage, or revoke the deed—while naming a beneficiary who receives the property automatically at death, outside probate.

Because ownership doesn't transfer until death, a Lady Bird deed does not trigger a Medicaid lookback penalty. It can be executed at any time, even after a Medicaid application is pending.

2. Irrevocable Trust

Transferring the home into an irrevocable trust permanently removes it from your parent's estate. The trust must be established and funded more than 60 months before the Medicaid application to avoid triggering a lookback penalty. Setting up an irrevocable trust typically costs $2,000–$5,000 in legal fees.

The five-year timing requirement makes this a planning tool, not a crisis tool. If your parent already needs care, the lookback clock hasn't run, and the transfer would create a penalty period.

3. Homestead Hardship Exemptions

Vermont's 2026 estate recovery rule rewrite (Rule 7108.3.2) created expanded protections for heirs who inherit the family home:

• A sibling who lived in the home for at least one year before institutional admission can exempt the home entirely
• A caregiver child who lived in the home for at least two years and delayed institutional care by at least two years can exempt the home
• A lineal heir (child or grandchild) can protect homes valued under $250,000 if their income is below 300% of the Federal Poverty Level or they provided care that delayed institutionalization by at least six months

These exemptions require filing Form DVHA 13 with the Coordination of Benefits Unit before the probate estate is closed.

4. Spousal Protection

If your parents are married and one enters a nursing home, the family home is fully protected during the community spouse's lifetime. No equity cap applies, no forced sale, no estate recovery claim until the surviving spouse also dies. This is automatic—no special filings required.

What to Do Right Now

If your parent is healthy and planning ahead, the Lady Bird deed is the simplest, lowest-cost option. It can be prepared by an elder law attorney for a fraction of what an irrevocable trust costs, and it doesn't require a five-year waiting period.

If your parent is already on Medicaid or about to apply, the Lady Bird deed can still be executed without penalty. Ensure the deed is properly notarized and recorded with the town clerk's office.

If your parent has already passed and estate recovery is pending, review the hardship exemptions immediately. Many qualifying heirs don't know these protections exist.

The Vermont Medicaid Long-Term Care & Asset Protection Guide includes the full estate protection strategy—from Lady Bird deed timing to hardship exemption filings—with the exact forms and filing procedures.

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