Tenancy by the Entirety Tennessee Medicaid

How Your Parent Holds Title to Their Home Determines Whether TennCare Can Claim It

Tennessee's Medicaid Estate Recovery Program (MERP) can file claims against the probate estate of any TennCare CHOICES recipient who was 55 or older. But there's a structural protection built into the system that most families don't realize exists: Tennessee uses a probate-only definition of "estate" for recovery purposes.

Under T.C.A. § 71-5-116, TennCare's recovery contractor (Myers and Stauffer LC) can only pursue assets that actually pass through a Tennessee probate court. Assets that transfer automatically to heirs or co-owners at death — bypassing probate entirely — are legally untouchable. This makes the way your parent holds title to their home one of the most important financial decisions in the entire TennCare planning process.

Tenancy by the Entirety: The Strongest Protection for Married Couples

Tenancy by the entirety is a form of property ownership available only to married couples in Tennessee. When a married couple holds their home as tenants by the entirety, neither spouse can sell, mortgage, or transfer the property without the other's consent. When one spouse dies, full ownership automatically transfers to the surviving spouse without going through probate.

For TennCare planning, this means:

• While both spouses are alive, the home is already exempt from the individual $2,000 resource cap (primary residence exemption, up to $752,000 in home equity for 2026)
• When the TennCare recipient dies, the property transfers to the surviving spouse automatically — it never enters probate, so the estate recovery program has no claim against it
• The surviving spouse receives the deceased spouse's interest without a probate estate-recovery claim, regardless of how much TennCare paid for the deceased spouse's care

The critical detail: the couple must actually hold title as tenants by the entirety, not as tenants in common. With tenants in common, each spouse owns a separable share that does pass through probate — and that share is subject to estate recovery. Check the deed. If it doesn't specify tenancy by the entirety (or doesn't include survivorship language), the protection may not apply.

Joint Tenancy With Right of Survivorship: Protection for Unmarried Co-Owners

For unmarried parents (widowed, divorced, or never married), tenancy by the entirety isn't available. Joint tenancy with right of survivorship is the closest alternative.

When two or more people hold property as joint tenants with right of survivorship, the deceased owner's interest automatically passes to the surviving owner(s) at death. Like tenancy by the entirety, this bypasses probate, putting the property beyond TennCare's reach.

A parent who wants to protect the family home might add an adult child to the deed as a joint tenant with right of survivorship. But this strategy comes with two significant risks:

Lookback period. If the parent adds the child to the deed within 60 months of applying for TennCare CHOICES, the transfer may be treated as a gift and trigger a penalty period of ineligibility. The penalty is calculated by dividing the value of the transferred interest by the daily penalty divisor ($295.87 for 2026). A $150,000 home transferred for $0 would create roughly 507 days of ineligibility.

Loss of control. Once a child is on the deed as a joint tenant, the parent can't sell or refinance the property without the child's consent. If the child has creditors, a divorce, or a judgment against them, that liability can attach to the property.

Payable-on-Death and Transfer-on-Death Designations

For bank accounts, investment accounts, and some financial assets, POD (Payable on Death) and TOD (Transfer on Death) designations achieve the same probate-avoidance effect. The account owner designates a beneficiary who receives the assets directly upon death, bypassing the estate entirely.

Tennessee does not recognize transfer-on-death deeds for real property — the legislature withdrew the most recent attempt (HB 1793/SB 2029) on February 25, 2026. So while you can put POD/TOD designations on bank accounts and brokerage accounts, you can't use a TOD deed to transfer a house. For real property, the title structure (tenancy by the entirety or joint tenancy with right of survivorship) is what matters.

When the Probate-Only Rule Doesn't Help

This strategy only protects assets that genuinely bypass probate. If your parent is the sole owner of their home and dies without adding anyone to the title, the home passes through probate — either under their will or through intestate succession — and TennCare's claim attaches.

The protections also don't help with the TennCare application itself. During the eligibility determination, TennCare applies its financial rules separately from post-death probate recovery. Your parent still needs to meet the $2,000 individual resource cap (with the primary residence exempt up to the equity limit) and the $2,982 monthly income cap to qualify.

And TennCare cannot place liens on the home during the recipient's lifetime — that's prohibited under Tennessee's estate recovery rules. The claim only arises after death, and only against probate assets.

The Timing Matters

Any change in title structure — adding a child to a deed, converting from tenants in common to tenants by the entirety — must be done carefully with the five-year lookback period in mind. Transfers made within 60 months of a TennCare CHOICES application will be scrutinized for fair market value, and anything that looks like a gift triggers a penalty.

The safest approach is to get the title structure right well before any TennCare application is contemplated. Any title change can affect eligibility or estate recovery: transfers for less than fair market value within 60 months before a CHOICES application may trigger a penalty, so get advice before changing title.

The Tennessee Power of Attorney & Guardianship Kit covers the probate-avoidance strategies that protect assets from TennCare estate recovery, including title structures, POD/TOD designations, and the documentation your family needs to establish each protection.

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