Indiana Medicaid Estate Recovery Program

What Estate Recovery Actually Means

When people say "the nursing home will take the house," they're conflating two different things. The nursing home itself doesn't seize property. What happens is this: after a Medicaid recipient aged 55 or older dies, the Indiana Family and Social Services Administration (FSSA) files a claim against their estate to recover the cost of long-term care services the state paid for during their lifetime.

This is the Medicaid Estate Recovery Program, and it operates under federal mandate — every state must attempt to recoup what it spent on nursing home care, waiver services, and other long-term supports from the deceased recipient's estate. Indiana's version is broader than most states, and a 2026 legislative change extended the window for the state to file its claim.

What FSSA Can Recover From

Under IC § 12-15-9-0.5, Indiana defines the "recoverable estate" expansively. It includes standard probate assets — everything that passes through the will or intestate succession — but also reaches non-probate assets that bypass the estate in most other legal contexts:

• Real property held in joint tenancy with right of survivorship (if the joint tenancy was created after June 30, 2002)
• Transfer-on-death (TOD) deeds — the property passes to the named beneficiary at death, but FSSA can still file against it
• Payable-on-death (POD) bank accounts — the named beneficiary gets the funds, but the state's claim follows

This means the common strategies families use to "avoid probate" — adding a child to the deed, naming a beneficiary on the bank account, using a TOD affidavit — don't necessarily protect assets from Medicaid recovery in Indiana.

The 2026 Deadline Extension

Under Public Law 160-2026, effective July 1, 2026, Indiana extended the deadline for FSSA to file a preferred claim against a deceased Medicaid recipient's estate from 120 days to nine months after the date of death. This change amended IC § 29-1-14-1(g) and IC § 29-1-7-7(d).

The practical impact: families who assumed they could settle the estate quickly and distribute assets before the state filed its claim now have far less room to maneuver. Nine months gives FSSA ample time to identify the death (through death certificate matching), calculate the total Medicaid expenditures, and file its claim with the probate court.

The estate's personal representative is legally required to notify the Medicaid Estate Recovery Unit if the deceased was 55 or older and received Medicaid-funded long-term care. Failing to notify doesn't eliminate the claim — it just means the state may file later in the nine-month window, potentially after assets have been partially distributed, creating clawback complications.

What's Protected from Recovery

Estate recovery is not absolute. Indiana law establishes clear situations where the state cannot proceed:

Surviving family members. FSSA cannot pursue estate recovery 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 under SSI standards

If your parent's spouse is still living, the state cannot file a claim against the estate until after the surviving spouse also dies. This protection is automatic — the family doesn't need to file anything to invoke it.

The caregiver child exemption. An adult child who lived in the parent's home continuously for at least 24 months immediately before the parent's admission to a nursing facility or waiver program, and who provided care that actively delayed institutionalization, can claim an exemption for the home from estate recovery. The child must have resided in the home continuously since the parent's admission.

The sibling exemption. A sibling who holds an equity interest in the home and has lived there continuously for at least 12 months immediately before the parent's institutionalization qualifies for an exemption.

Assets excluded from recovery by policy:

• Life insurance proceeds paid to a named beneficiary
• Retirement accounts (IRAs, 401ks) passing to a named beneficiary
• Real property held as "tenancy by the entireties" (standard joint ownership for married couples)
• Real property subject to a valid life estate
• Assets protected under an approved Indiana Long Term Care Insurance Partnership policy

How Much the State Recovers

FSSA doesn't recover a set amount — it recovers up to the total Medicaid expenditures made on behalf of the deceased recipient. For someone who spent three years in a Medicaid-funded nursing home at $8,000+ per month, the claim could exceed $300,000. For someone who received home and community-based waiver services for two years, the total might be $40,000–$80,000.

The estate only pays what it has. If the estate's total value is less than FSSA's claim, the state recovers what's available and writes off the rest. FSSA's claim is a "preferred claim" — it gets priority over most other creditors and over distribution to heirs, but it doesn't exceed the estate's actual assets.

The Undue Hardship Waiver

Heirs have 90 days from receiving a recovery claim to apply for an Undue Hardship Waiver. The waiver may be granted if:

• The asset is the family's sole income-producing property (a family farm, a rental property that provides the survivor's only income)
• The homestead is modest and loss of it would cause severe financial distress to surviving family members
• Other circumstances that make recovery unconscionable given the survivor's situation

The waiver isn't automatic and isn't granted generously — you need to document genuine hardship, not merely inconvenience or reduced inheritance.

Planning Around Estate Recovery

The best time to address estate recovery is before your parent ever applies for Medicaid, ideally more than five years before (outside the lookback window). Strategies that work within the rules:

Long-Term Care Insurance Partnership policies. Indiana participates in the Long-Term Care Insurance Partnership Program. Policies purchased under this program provide asset protection dollar-for-dollar — if the policy pays out $200,000 in benefits, $200,000 in assets are permanently sheltered from both the Medicaid spend-down and from estate recovery.

Irrevocable trusts. These are complex asset-protection techniques, and a transfer can implicate the 60-month lookback. Have an elder-law attorney draft and execute any trust strategy to address both Medicaid eligibility and estate recovery.

Tenancy by the entireties. For married couples, real property held as tenancy by the entireties is excluded from recovery under Indiana policy. Ensure the deed is titled correctly before any Medicaid application.

Named beneficiaries on excluded accounts. Life insurance and retirement accounts with named beneficiaries pass outside the recoverable estate. Keeping these designations current (and not payable to the estate itself) protects these assets.

Our Indiana Power of Attorney & Guardianship Kit includes a Medicaid eligibility worksheet that maps the asset and income landscape, including which assets are exempt, which are countable, and which may be subject to estate recovery. Understanding the full picture before applying helps families make informed decisions about asset positioning — and avoids the shock of a six-figure state claim arriving nine months after a parent's death.

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