Can Medicaid Take Your House in New Jersey?

The Short Answer: Not While You're Living In It

Medicaid cannot force you to sell your home or take it from you while you're alive and living in it. The primary residence is an exempt asset for Medicaid eligibility purposes in New Jersey — meaning it doesn't count toward the $2,000 individual asset limit — as long as either:

• The applicant intends to return home, or
• A spouse, a dependent child, or a disabled child lives there

There's one important limit: the home equity exemption caps at $1,130,000 in 2026. If your parent's home equity exceeds that amount, the excess may count as a countable asset; confirm the treatment with the county if a spouse lives in the home.

The Real Risk: Estate Recovery After Death

The danger isn't losing the house during your parent's lifetime. It's what happens after they die.

New Jersey operates a Medicaid Estate Recovery Program (MERP) through the Division of Medical Assistance and Health Services. After a Medicaid recipient aged 55 or older dies, the state files a claim against their estate to recoup every dollar spent on long-term care services.

Here's what makes New Jersey's program particularly aggressive: the state uses an expanded estate definition. Recovery isn't limited to assets that pass through probate. The state can pursue:

• Probate assets (property solely in the deceased's name)
• Joint bank accounts (to the extent of the deceased's interest)
• Life estates in real property
• Assets held in living trusts and revocable trusts

This means transferring a home into a living trust or holding it jointly won't necessarily shield it from recovery.

When Recovery Is Deferred

The state must defer its recovery claim while any of the following are alive:

• A surviving spouse
• A surviving child under age 21
• A surviving child of any age who is blind or permanently and totally disabled

So if your parent's spouse is still living in the house, MERP won't touch it until the surviving spouse also passes away. After that deferral ends, the claim resumes against whatever estate assets remain.

The Home Equity Exemption Is Not Permanent Protection

A common misunderstanding: families assume that because the home is "exempt" for Medicaid eligibility, it's permanently protected. It's not. The home exemption only means it doesn't count against the asset limit when applying. Once the Medicaid recipient dies, MERP can and does place claims against the home's value.

The state's claim equals the total amount of Medicaid benefits paid — which for nursing home care at $12,000+ per month can quickly reach six figures.

Reducing MERP Exposure

New Jersey recognizes specific legal exemptions that can protect the home from estate recovery:

Caregiver child exception: A parent can transfer the home to an adult child without triggering a lookback penalty if that child lived in the home for at least two years before the parent's institutionalization and provided care that delayed nursing home placement. This requires physician documentation.

Sibling exception: The home can be transferred to a sibling who has an equity interest in the property and lived there for at least one year before institutionalization.

Spousal transfers: Transfers to a spouse (or to a trust solely for the spouse's benefit) are always exempt from the lookback penalty.

Each transfer must satisfy its exception's timing and documentation requirements. The caregiver-child and sibling rules are measured against institutionalization, while the 60-month lookback still applies to non-exempt transfers.

Acting Before It's Too Late

The families who lose the most to estate recovery are the ones who never planned for it. If your parent is approaching long-term care and owns a home in New Jersey, the time to evaluate these protections is now — not after the Medicaid application is filed.

Our New Jersey Medicaid Long-Term Care & Asset Protection Guide covers the full estate recovery process, home transfer exemptions, and the 20-day deadline for filing an undue hardship waiver after receiving a MERP claim notice.

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