What Happens to Jointly Owned Property If One Owner Needs Care?

When one co-owner of a home moves into long-term care, the property is not automatically sold or seized. What happens to jointly owned property if one owner needs long-term care depends on three things: how the deed is titled, who else lives in the home, and whether the owner in care relies on Medicaid to pay the bill. In many families the house stays intact for years. In others, a lien, a forced spend-down, or a state recovery claim after death becomes a real risk if no one understands the rules in advance.

Will the Home Have to Be Sold to Qualify for Care

Nursing facility care runs thousands of dollars a month, and Medicaid is the main payer for people who cannot cover it privately. To qualify, an applicant’s countable assets generally cannot exceed $2,000. Bank accounts, investments, and other liquid holdings count. The applicant’s primary residence usually does not.

That exemption has limits. For an applicant already living in a facility, the home stays exempt as long as the applicant expresses an intent to return, even if return is unlikely in practice. The home also stays exempt if a spouse continues to live in it. If neither is true, the home’s equity gets a closer look.

Federal rules set a home equity cap that each state must adopt somewhere inside a federal range. For 2026, the minimum is $752,000 and the maximum is $1,130,000.¹ Equity is fair market value minus any debt against the property. If the applicant’s equity interest sits above the state’s chosen threshold and no qualifying person lives there, that equity can become a countable asset the applicant must spend down before Medicaid will pay.

Protections for a Co-Owner Who Still Lives in the Home

Who else lives in the home is often the single most important factor.

If the co-owner is a spouse, federal spousal impoverishment rules prevent the state from leaving the at-home spouse (the “community spouse”) destitute. The community spouse can keep the home entirely without it counting toward the applicant’s asset limit. The community spouse also keeps a federally capped share of the couple’s other countable assets and can receive a monthly income allowance from the institutionalized spouse’s income.¹ While the community spouse lives in the home, the state cannot place a lien on it, cannot force a sale, and cannot pursue estate recovery.² For most married couples with a jointly owned home, the property is safe during both lifetimes. Exposure begins after the surviving spouse dies.

Several non-spouse residents also block a lien during the applicant’s life:

A child who is under 21, blind, or permanently disabled.
A sibling who has an equity interest in the home and lived there for at least one year before the applicant entered the facility.

These residents don’t own the home outright through protection alone, but their presence shields it from a lien while the Medicaid recipient is alive.³

How the Deed Is Titled Changes the Outcome

Joint ownership is not one thing. The form on the deed drives both Medicaid treatment during life and what happens to the home at death.

Tenancy in Common

Each owner holds a separate, divisible share, equal or unequal. When one co-owner applies for Medicaid, the state can count that owner’s share as an asset. If the home isn’t otherwise exempt, the applicant may need to sell or transfer that interest to qualify. Because each share is distinct, it passes through the deceased owner’s probate estate, which exposes it to Medicaid estate recovery.

Joint Tenancy With Right of Survivorship

Each owner holds an equal, undivided interest in the whole. When one owner dies, the interest passes automatically to the surviving owner outside probate. Medicaid treatment of a living applicant’s share varies by state. Some states count it. Others treat it as inaccessible when the co-owner refuses to sell, on the reasoning that the applicant cannot unilaterally liquidate an undivided interest. That inaccessibility determination usually depends on state Medicaid policy and whether a co-owner actively objects.

Tenancy by the Entirety

Available only to married couples and only in certain states. Neither spouse can sell or encumber an interest without the other’s consent, which gives this form the strongest protection against Medicaid liens and creditor claims. Combined with the community spouse rules, tenancy by the entirety makes it very difficult for the state to reach the home during either spouse’s life.

Can a Co-Owner Force a Sale

Any non-spouse co-owner holding property as tenants in common or joint tenants can file a partition action and ask a court to force a sale, even over objection. Courts typically order the property sold at auction with proceeds divided by ownership share. Partition is an option when the financial strain of a co-owner’s long-term care becomes unmanageable, though an extreme one. For spouses, state family law and community property rules sharply limit partition of marital property.

Can the State Put a Lien on the Home While the Owner Is Still Alive

Yes, in some cases. Federal law authorizes states to place a lien (sometimes called a TEFRA lien) on the home of a Medicaid recipient who is permanently institutionalized and not expected to return.³ The lien protects the state’s claim if the home is sold, but it does not force a sale on its own.

A lien cannot be placed when the spouse, a child under 21, a blind or disabled child, or a qualifying sibling with equity lawfully lives in the home. If the recipient is later discharged and returns home, the lien must be removed.⁴ Families sometimes assume a lien is permanent once filed. It isn’t.

What Happens to the Home After the Owner in Care Dies

Federal law requires every state to operate a Medicaid estate recovery program. For anyone 55 or older who received Medicaid, states must seek recovery for nursing facility services, home and community-based services, and related hospital and prescription drug costs.⁴

At a minimum, states pursue recovery from assets in the probate estate.² Property held as tenants in common passes through probate and is directly exposed. Property held as joint tenants with right of survivorship bypasses probate and transfers automatically to the surviving co-owner at the moment of death.

Here is the catch. A significant number of states have expanded the definition of “estate” beyond probate assets. In those states, the Medicaid agency can pursue recovery against jointly held property, life estates, and trust interests that passed outside probate. Federal law explicitly allows this.³ Whether a survivorship deed actually shields the home from recovery depends on whether your state uses the narrow probate definition or the expanded one.

Recovery is deferred while any of these people are alive or living in the home:

A surviving spouse, wherever they live.
A child under 21, or a blind or permanently disabled child of any age.
A sibling with an equity interest who has lived in the home continuously since at least a year before the recipient entered care.
An adult child who lived in the home for at least two years before institutionalization, has lived there continuously since, and provided care that delayed the need for nursing facility placement.

These protections defer recovery; they don’t erase it. Once the qualifying person dies, moves out, or stops meeting the criteria, the state can resume its claim.²

Federal law also requires states to waive recovery when it would cause undue hardship, but Washington leaves “hardship” undefined, so state rules vary widely. Common categories include homes of modest value, heirs who have lived in the home continuously and cannot afford other housing, situations where recovery would deprive an heir of basic necessities, and property that is the heir’s sole source of livelihood. States must notify survivors about recovery and give them a chance to request a hardship waiver.²

Giving Away Your Share Before Applying for Medicaid

Transferring your interest in a jointly owned home to dodge the asset limit is exactly what the look-back period is designed to catch. Federal law requires states to review all financial transactions in the 60 months before the Medicaid application.³

When the state finds a transfer for less than fair market value, it imposes a penalty period of Medicaid ineligibility. The penalty length equals the uncompensated value divided by the average monthly cost of private nursing care in that state.³ Give away a $150,000 property interest in a state where the average monthly cost is $10,000, and you face 15 months of ineligibility. During that stretch, you pay for your own care.

Several transfers are penalty-free. You can transfer your interest in the home to:

Your spouse. Spousal transfers are always exempt.
A son or daughter who lived in the home for at least two years before you entered a facility and provided care that delayed your need for institutional placement.
A child who is blind or permanently disabled, with no residency requirement.
A sibling who has an equity interest in the home and lived there for at least one year before you entered the facility.

The caregiver child exception is one of the most valuable protections for a jointly owned home and one of the hardest to prove. The state will demand documentation of two years of residency and real caregiving. Tax returns and a driver’s license showing the parent’s address, medical records of the parent’s care needs, a signed physician statement confirming the parent required a nursing-home level of care, personal records of daily tasks, and witness statements from neighbors or other relatives all help. Without strong documentation prepared in advance, families lose this exemption at the application stage.

The Tax Cost of Transferring Instead of Inheriting

Families focused on shielding a home from Medicaid often miss the tax side of a lifetime transfer. The difference between inheriting and receiving a gift can run into tens of thousands of dollars.

Someone who inherits property gets a “stepped-up basis.” Their cost basis resets to the fair market value at the date of death. If a parent bought a home for $80,000 and it is worth $350,000 when they die, the child inherits with a $350,000 basis and owes no capital gains tax on a sale at that price.

Someone who receives property as a lifetime gift takes the donor’s original basis instead.⁵ Same example, but now the child’s basis is $80,000. Selling for $350,000 triggers capital gains tax on $270,000 of profit. Depending on bracket, that can be $40,000 or more in federal tax alone.

There is also a reporting obligation. For 2026 the annual gift tax exclusion is $19,000 per recipient.⁶ Transferring a property interest worth more than that requires filing a gift tax return. Most donors won’t owe actual gift tax unless they have exceeded the lifetime exemption, but the return still has to be filed.

A transfer that saves the home from the state can shift the cost to the IRS. Both sides belong on the table before anyone signs a new deed.

Planning Tools That Need Lead Time

Two strategies come up often for jointly owned property, and both require the family to plan years ahead.

Irrevocable Trusts

Transferring the home into an irrevocable trust removes it from the applicant’s countable assets because the applicant no longer owns or controls the property. An independent trustee holds it for named beneficiaries. The applicant cannot take it back.

Timing is the whole game. The transfer into the trust is a gift for Medicaid purposes, which puts it inside the 60-month look-back and exposes it to the penalty calculation.³ The trust must be funded at least five years before any Medicaid application. Set up too late, and the family pays for care privately through the penalty period.

Life Estates

A life estate lets the homeowner keep the right to live in the home for life while transferring future ownership (the “remainder interest”) to a child or other beneficiary. The life tenant occupies the home, pays taxes, and maintains it. At death, ownership passes automatically to the remainder beneficiary outside probate.

For Medicaid eligibility, the life estate interest can itself be treated as exempt if the property is the applicant’s principal residence. But creating the arrangement means transferring the remainder interest, which Medicaid treats as a gift and runs through the look-back analysis. Five years of lead time is essential here too.

Life estates also interact with estate recovery. In states with an expanded estate definition, the state may recover against the life estate even though the remainder passes outside probate. State rules on this point vary enough that a plan built on the wrong assumption can collapse at exactly the moment it needed to work.

1
Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
2
Office of the Assistant Secretary for Planning and Evaluation. Medicaid Estate Recovery
3
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
4
Centers for Medicare & Medicaid Services. Estate Recovery
5
Internal Revenue Service. Property (Basis, Sale of Home, Etc.)
6
Internal Revenue Service. What’s New – Estate and Gift Tax