Transfer on Death Deeds and Medicaid in Nebraska
The Problem With Common Estate Planning
A transfer-on-death (TOD) deed is one of the most popular estate planning tools in Nebraska. Your parent signs a deed that passes the home directly to named beneficiaries when they die — no probate required. It's simple, inexpensive, and keeps the home out of the court system.
But if your parent receives Medicaid long-term care benefits, a TOD deed does not protect the home from estate recovery. This is one of the most consequential misunderstandings in Nebraska elder law.
Why TOD Deeds Don't Work Against Nebraska Medicaid
Most states limit Medicaid estate recovery to assets that pass through probate. In those states, a TOD deed successfully moves the home outside the probate estate, and the state can't recover against it.
Nebraska is different. Under Neb. Rev. Stat. § 68-919, the state operates an "expanded estate" recovery program. This means DHHS can recover Medicaid costs not just from probate assets, but from assets that transfer outside of probate — including TOD deeds.
After a Medicaid recipient dies, DHHS may pursue recovery from the expanded estate, including property that passed to TOD beneficiaries, up to the amount allowed by law. The state acts as a general creditor; the named beneficiaries' receipt of the property does not place it outside the state's recovery reach.
The TOD deed doesn't prevent recovery or create a probate-only boundary. It transfers the property outside probate while § 68-919 still permits DHHS to reach it for estate recovery.
Living Trusts Face the Same Problem
Living trusts — where your parent transfers property into a revocable trust during their lifetime — are the other common estate planning tool that fails against Nebraska's expanded recovery.
The logic is the same: a revocable living trust avoids probate, but § 68-919 doesn't stop at probate boundaries. Assets held in a living trust at the time of death are reachable by DHHS for estate recovery.
Even irrevocable trusts can create problems if they were funded within the 60-month Medicaid lookback period. Transferring property into an irrevocable trust is treated as a transfer for less than fair market value, potentially triggering a transfer penalty that delays Medicaid eligibility.
Free Download
Get the Nebraska — Medicaid Long-Term Care Eligibility Checklist
Everything in this article as a printable checklist — plus action plans and reference guides you can start using today.
What Else § 68-919 Reaches
The expanded estate definition covers:
- Joint tenancy accounts and property — bank accounts or real property held with survivorship rights
- Payable-on-death (POD) accounts — bank and financial accounts with designated beneficiaries
- Transfer-on-death deeds — real property passing outside probate to named beneficiaries
- Retained life estates — where the parent deeded the property but kept the right to live in it
- Living trust assets — property held in revocable or certain irrevocable trusts
The common thread: every strategy that avoids probate in other states still falls within Nebraska's recovery reach.
What Actually Protects the Home
A surviving spouse. DHHS holds estate recovery in abeyance while a surviving spouse is alive. This is the strongest protection available and requires no special planning, but the claim may become recoverable after the spouse dies if no protected survivor remains.
A child under 21 or a blind/disabled child. A surviving child under 21 or a blind/disabled child of any age prevents immediate recovery; the statute does not condition this protection on living in the home.
The caregiver child protection. An adult child who lived in the home with the parent for at least two years immediately before the nursing home admission and continuously since institutionalization, provided care that delayed placement, and can document those facts may receive protection against foreclosure of a recovery lien on the home. A physician's written attestation is sufficient documentation; the protection does not necessarily erase the underlying debt.
The sibling protection. A sibling with an equity interest in the home who lived there for at least one year immediately before the recipient's institutionalization and continuously since may receive protection against foreclosure of a recovery lien on the home.
The Undue Hardship Waiver. If recovery would cause severe financial distress — forcing the heir to qualify for public assistance, or the asset is a family farm or business providing primary livelihood — heirs can apply for a waiver within 30 days of the probate claim deadline (or 90 days after death if no probate).
What Families Should Do Instead
If your parent already has a TOD deed or living trust and may need Medicaid in the future, don't rush to undo it. The deed or trust may still serve other estate planning purposes (avoiding probate costs, simplifying transfers). But don't count on it to protect the home from Medicaid recovery.
Instead, focus on strategies that work within Nebraska's rules: the caregiver exemption documentation, proper spend-down during the eligibility phase, and understanding the estate recovery timeline so heirs can respond appropriately after death.
The Nebraska Medicaid Long-Term Care & Asset Protection Guide covers each of these strategies with the specific statutory citations, documentation requirements, and timelines that apply under Nebraska's expanded recovery framework — so families can make informed decisions rather than relying on estate planning tools that sound protective but aren't.
Get Your Free Nebraska — Medicaid Long-Term Care Eligibility Checklist
Download the Nebraska — Medicaid Long-Term Care Eligibility Checklist — a printable guide with checklists, scripts, and action plans you can start using today.