Nebraska Medicaid Estate Recovery: How LB 268 Changed the Rules

After a parent on Medicaid dies, the state comes for reimbursement. Every state does this. But Nebraska's rules are among the broadest in the country, and families who relied on common asset-protection strategies used in other states often discover — too late — that those strategies don't work here.

The reason is Legislative Bill 268. It expanded what Nebraska counts as a recoverable "estate" far beyond traditional probate assets.

What DHHS Can Recover

Under Neb. Rev. Stat. § 68-919, Nebraska uses an expanded estate definition. The Medicaid Estate Recovery Program (MERP) can pursue claims against both probate and non-probate assets:

• Solely owned real estate — standard probate recovery
• Joint tenancy real estate — recoverable to the extent of the beneficiary's interest immediately before death
• Transfer-on-death (TOD) deeds — not protected; assets transferred via TOD are fully exposed
• Life estates — recoverable after 12 months from deed recording, unless a qualifying caregiver relative met residency and care standards
• Living trusts — recoverable unless properly structured as irrevocable and funded before the lookback period
• Checking, savings, and payable-on-death accounts — including the $4,000 asset disregard allowed during life

This means adding a child to a home's deed as a joint tenant, recording a TOD deed, or setting up a basic living trust does not shield property from Medicaid recovery in Nebraska. The state's recovery rights attach to the beneficiary's interest "immediately preceding the time of the recipient's death."

The 60-Month Lookback Period

Any transfer of assets for less than fair market value within 60 months before the Medicaid application triggers a penalty period of ineligibility. This includes gifts to children, selling a home below market value, or moving money into another person's name.

The penalty is calculated by dividing the total uncompensated transfer amount by the average monthly cost of nursing home care. A $50,000 gift creates roughly 6 months of Medicaid ineligibility during which your parent must pay privately for care.

Home Equity Limit

The primary home is exempt from countable assets during a parent's lifetime — but only up to $752,000 in equity (2026 limit). If a spouse, minor child, or disabled child lives in the home, the equity cap doesn't apply.

After death, the home becomes the primary target for estate recovery unless a qualifying family member still lives there.

Who Is Protected from Recovery

Federal and Nebraska law create absolute bars to estate recovery in specific family situations. DHHS cannot pursue recovery if any of these relatives survive the beneficiary:

• Surviving spouse — recovery is deferred entirely while the spouse is alive
• Minor child (under 21)
• Blind or permanently disabled child of any age
• Sibling with equity interest who lived in the home for at least one year before the parent's institutionalization and has lived there continuously since
• Caregiver child who lived in the home for at least two years before institutionalization, provided care that delayed nursing home placement, and has lived there continuously since — requires a physician's written attestation under § 68-919

If none of these apply, heirs can request an undue hardship waiver. These are evaluated case-by-case, typically when recovery would deprive heirs of their primary residence or sole income-producing asset.

Pre-Death Liens

Nebraska law permits TEFRA pre-death liens on real property of permanently institutionalized recipients not expected to return home. In practice, DHHS generally operates as a creditor during probate rather than placing pre-death liens, and their claim is subordinate to funeral expenses and estate administration costs. But the legal authority exists.

What Families Should Do

The expanded recovery rules mean Medicaid planning in Nebraska requires professional help — not generic internet advice. An elder law attorney can structure exempt transfers (like the caregiver-child exception), properly fund irrevocable trusts outside the lookback window, and navigate the specific documentation requirements for hardship waivers.

The Nebraska Dementia & Memory Care Guide covers the full estate recovery framework, including a decision tree for determining which family protections apply to your specific situation.

See more Nebraska guides →