Medicaid Estate Recovery in NC: What Families Need to Know
The Medicaid Bill Your Family Might Not Expect
Your parent received Medicaid benefits for years. The nursing home was paid, the medications were covered, and your family was grateful. Then your parent passes away, and a notice arrives from the North Carolina Department of Health and Human Services: the state wants to be repaid.
This is Medicaid estate recovery, and it surprises many North Carolina families who did not know it was coming. Understanding how the program works, what can be recovered, what is exempt, and what options your family has is essential for anyone serving as executor of an estate where the deceased received Medicaid benefits.
What Is Medicaid Estate Recovery?
Federal law requires that states attempt to recover certain Medicaid costs from the estates of deceased Medicaid recipients. North Carolina operates its estate recovery program through NC DHHS, Division of Medical Assistance (DMA).
North Carolina’s program is governed by NC General Statutes Section 108A-70.5. The program applies to individuals who:
- Were age 55 or older when they received Medicaid benefits, OR
- Received nursing facility services, intermediate care facility services, or home and community-based waiver services at any age
If either condition applies, NC DHHS has the right to file a claim against the deceased’s estate to recover the cost of those benefits.
What Costs Can NC Recover?
NC DHHS can seek recovery for:
- Nursing facility services
- Home and community-based services (Medicaid waiver programs)
- Hospital and prescription drug services received when the recipient was in a nursing facility or receiving waiver services
- Related services provided after age 55
The state files a claim as a creditor of the estate, typically after the estate is opened in the probate court. The claim amount is the total Medicaid expenditures on behalf of the deceased, which can reach into the hundreds of thousands of dollars for long-term care cases.
The Estate Recovery Claim Process
When a Medicaid recipient dies, NC DHHS is typically notified through the death records system. The DMA then calculates the recoverable benefits and files a claim against the estate.
As executor, you will receive this claim during the creditor claims period. North Carolina gives creditors 90 days from the date of the first publication of the Notice to Creditors to file claims against the estate. NC DHHS follows this same process. For more on the creditor claims timeline, see our article on dealing with creditors during probate in NC.
The Medicaid estate recovery claim has a specific priority order under NC law. It is treated as a general creditor claim, which means it is paid after secured debts, funeral costs, administration expenses, and certain other priority claims, but before distributions to beneficiaries.
If the estate does not have enough assets to pay the full claim, NC DHHS receives whatever is available and cannot pursue the beneficiaries personally for the remainder. The state can only recover from the estate, not from heirs directly.
What Is Exempt from Estate Recovery?
NC law provides several important exemptions that can protect family members from losing assets to estate recovery:
Surviving Spouse
If the deceased Medicaid recipient is survived by a spouse, NC DHHS will not attempt to recover during the spouse’s lifetime. The claim is deferred until the surviving spouse also dies. At that point, the state may file a claim against the surviving spouse’s estate for the original Medicaid recipient’s costs, but only if the property in question was jointly owned or passed to the surviving spouse.
This deferral is significant: it means a surviving spouse can continue to live in the family home and use shared assets without facing an immediate recovery demand.
Minor Children
Recovery is also deferred if the deceased is survived by a child who is under 21 years old. The deferral lasts until the child turns 21.
Disabled or Blind Children
Recovery is deferred if the deceased is survived by a child of any age who is blind or permanently and totally disabled under the criteria used by the Social Security Administration. This deferral lasts for the lifetime of the disabled child.
The Homestead and the “Estate” Definition
An important limitation on NC’s estate recovery program: NC currently defines “estate” for recovery purposes as the probate estate only. This means assets that pass outside of probate, such as jointly owned property with right of survivorship, assets held in a living trust, or accounts with named beneficiaries, are generally not subject to estate recovery under current NC law.
This is a meaningful protection. If the family home was owned jointly with a surviving child and passes by right of survivorship, it may not be subject to Medicaid estate recovery. However, this area of law can change, and the specifics depend on how the property is titled and the exact circumstances.
Consult an NC elder law attorney to understand how this applies to your situation.
Hardship Waivers
NC DHHS has the authority to waive estate recovery claims in cases of undue hardship. A waiver may be available when:
- The estate consists primarily of a family home and the heirs have limited income and assets
- Recovery would deprive a family member of the primary source of income or living arrangements
- Other circumstances make recovery inequitable
To request a hardship waiver, you must submit a written request to NC DHHS within a specified timeframe after receiving the estate recovery claim. The request must include documentation of the hardship circumstances.
Hardship waivers are not automatic and are granted on a case-by-case basis. An elder law attorney can help you prepare a strong waiver request.
Strategies Families May Consider
The best time to think about Medicaid estate recovery is before a family member needs long-term care, not after they pass away. However, if you are currently administering an estate, there are still steps worth understanding.
Irrevocable Medicaid Asset Protection Trusts (Before Death)
If your family member is not yet on Medicaid and long-term care is anticipated, an irrevocable trust (often called a Medicaid Asset Protection Trust or MAPT) can be used to remove assets from the probate estate. Assets properly transferred to this type of trust may be protected from estate recovery because they are not part of the probate estate. However, transfers to a MAPT are subject to Medicaid’s five-year look-back period.
The Five-Year Look-Back Period
Medicaid has a five-year look-back rule for long-term care coverage. If assets are transferred for less than fair market value within five years before applying for Medicaid, the transfer may result in a penalty period during which Medicaid will not cover nursing home costs. This means gifting assets shortly before applying for Medicaid can create significant problems.
Estate recovery does not have a look-back period in the same way. It looks at what was in the probate estate at death, not at transfers made years earlier (though Medicaid eligibility look-back still applies for prior transfers).
Beneficiary Designations and Joint Ownership
Because NC’s estate recovery program is limited to the probate estate, assets that pass outside of probate are generally not subject to recovery under current law. This is not a fraudulent strategy; it is simply how NC law is written. However, any planning of this type must be done well in advance and with full awareness of Medicaid eligibility rules.
How Afterpath Helps With Complex Estate Claims
Medicaid estate recovery claims add a layer of complexity to an already demanding process. Afterpath’s task management system tracks every creditor claim and deadline, including NC DHHS notifications, so nothing slips through.
Pathfinder can help you understand what the Medicaid claim means, what exemptions may apply based on your family’s circumstances, and what steps to take when you receive a recovery notice. The guidance is NC-specific, reflecting the actual rules under NC General Statutes and DMA policy.
Afterpath’s document vault gives you a secure place to store communications from NC DHHS, hardship waiver requests and responses, medical expense records, and all correspondence related to the estate recovery process.
The NC compliance engine ensures you are meeting all NC probate requirements, including proper creditor notification procedures that affect how and when NC DHHS can file its claim.
Frequently Asked Questions
Q: My mother received Medicaid for three years in a nursing home. How much will NC DHHS try to recover?
A: NC DHHS will file a claim for the full amount of Medicaid expenditures on your mother’s behalf during the period of covered services. Nursing home care can cost $7,000 to $10,000 per month or more, so three years of coverage could represent a claim of $250,000 or higher. The actual amount recoverable depends on what assets are in the probate estate.
Q: My father’s house is the only asset. Can NC DHHS take it?
A: If the house is part of the probate estate, it is subject to the estate recovery claim. However, if you are a surviving spouse, a minor child, or a disabled child, recovery is deferred. You may also be able to apply for a hardship waiver. If the house was jointly owned and passes outside of probate by right of survivorship, it may not be subject to recovery under current NC law.
Q: Does NC DHHS get paid before the heirs receive anything?
A: Yes. Medicaid estate recovery is a creditor claim against the estate. Estate assets must first pay priority expenses (funeral costs, administration costs, secured debts, family allowances), and then general creditors including NC DHHS, before any distributions are made to beneficiaries.
Q: Can Afterpath help me respond to a Medicaid estate recovery claim?
A: Afterpath helps you understand the process, track deadlines, and organize the documentation needed for your response. For complex claims or hardship waiver applications, you will also want to work with an NC elder law attorney. Join the waitlist at /waitlist/ to get early access.
Q: What if the estate doesn’t have enough money to pay the Medicaid claim?
A: NC DHHS can only recover from estate assets. If the estate is insolvent (meaning debts exceed assets), the state receives whatever is available in priority order and cannot pursue the heirs personally for any unpaid balance.
You Don’t Have to Navigate This Alone
Medicaid estate recovery is one of the most unexpected and emotionally difficult aspects of settling an estate in North Carolina. Finding out that the state has a claim against your parent’s home or savings is painful, especially when you have already been through the loss.
Afterpath is here to help you understand your rights, meet every deadline, and make informed decisions. Pathfinder provides NC-specific guidance, and the task management system keeps every step organized.
Join the Afterpath waitlist at /waitlist/ and get the support your family deserves during one of life’s most difficult processes.
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