Estate Planning. Protect What You've Built.
Worried about losing your home or savings to Medicaid recovery? You are not alone. This guide breaks down what Tennessee can take, what they cannot, and what your family can do right now to protect your assets — in plain English.
1. Estate Recovery — What Tennessee Takes Back
This is the part most families do not know about until it is too late. After a Medicaid recipient passes away, the state can come after the estate to recover what it paid.
How Estate Recovery Works
After a TennCare Medicaid recipient dies, the state of Tennessee can file a claim against their estate to recover the costs of nursing home care that Medicaid paid for. This is called "estate recovery" or "Medicaid estate recovery."
The claim is against the estate — not against family members personally. But if the estate includes a home, bank accounts, or investments in the deceased person's name, those assets are fair game.
- What they recover from: Probate assets — the home, bank accounts, investments, and other property in the deceased's name.
- They can place a lien on the home while the estate is being settled.
- This applies to nursing home Medicaid, not typically for regular TennCare coverage.
- The surviving spouse is protected while alive — estate recovery does not happen until after both spouses have passed.
The Numbers Are Sobering
The average cost of nursing home care in Tennessee is approximately $8,000 per month — that is $96,000 per year. If a loved one spent three years in a nursing home, the estate recovery bill could be $288,000 or more.
Without planning, that bill can wipe out everything a family has worked a lifetime to build.
Protections and Exemptions
Estate recovery is not automatic in every case. There are important protections:
- Surviving spouse: Recovery is deferred while a surviving spouse is alive.
- Disabled child: If a disabled child (of any age) lives in the home, recovery is deferred.
- Dependent child under 21: Recovery is deferred if a child under 21 lives in the home.
- Hardship exemptions: Families can apply for a hardship waiver if recovery would cause undue hardship — for example, if the home is the family's only significant asset and selling it would leave them destitute.
2. Protecting the Home
This is the number one question families ask: "How do I keep the state from taking our house?" Here are your options.
While a Spouse Is Alive
The family home is exempt as long as a spouse, disabled child, or dependent child under 21 lives there. Tennessee cannot force a sale of the home while these people are living in it. The home does not count as an asset for Medicaid eligibility purposes.
The risk comes after both spouses have passed — that is when estate recovery kicks in.
3. Beneficiary Designations — The Easy Wins
These are things you can do right now, for free, that can protect significant assets from probate and potentially from estate recovery. If you do nothing else on this page, do these.
The Key Rule
NEVER name "my estate" as the beneficiary on any account. Always name a specific person. When you name a person, the asset passes directly to them — bypassing probate and, in many cases, estate recovery. When you name "my estate," the asset goes into the probate estate where Tennessee can claim it.
Assets That Can Bypass Probate
Each of these can be set up to transfer directly to a named person when you die, without going through probate:
- Life insurance: Name a beneficiary (a person, not "the estate"). Proceeds go directly to the named person, tax-free, outside of probate. This is often the easiest and most valuable protection a family can have.
- Retirement accounts (IRA, 401k): Name a beneficiary. The account passes directly to that person without going through probate.
- Bank accounts with POD (Payable on Death): Go to your bank and add a POD designation to your checking and savings accounts. When you die, the money goes directly to the named person. You keep full control while alive.
- Investment accounts with TOD (Transfer on Death): Same concept as POD, but for brokerage and investment accounts. Contact your brokerage to add a TOD designation.
- Joint accounts with right of survivorship: If you hold a joint account with another person, the account passes automatically to the surviving owner.
Do This Today
Setting up beneficiary designations is free at most banks and brokerages. Here is your action list:
- Call your bank and add POD designations to every checking and savings account.
- Call your brokerage and add TOD designations to investment accounts.
- Review your life insurance beneficiaries — make sure a person is named, not "my estate."
- Review your retirement account beneficiaries (IRA, 401k, pension) — same rule.
- Make sure your joint accounts are set up with right of survivorship.
This takes an afternoon of phone calls and could save your family tens of thousands of dollars.
4. Funeral and Burial Pre-Planning
This is one of the smartest — and most overlooked — ways to protect assets. Prepaid funeral plans are completely exempt from Medicaid's asset count.
Why This Matters
An irrevocable prepaid funeral plan is 100% exempt from Medicaid's asset count. This means every dollar you put into a prepaid funeral is a dollar that does not count against the $2,000 asset limit. It is a completely legal, well-established way to spend down assets while getting real value for your money.
- Lock in today's funeral prices. Funeral costs increase every year. Prepaying now means your family will not face inflated prices later.
- The plan must be irrevocable — meaning it cannot be cashed out or refunded. This is what makes it exempt from Medicaid. A revocable plan can still be counted as an asset.
- You can include everything: casket, burial plot, headstone, funeral service, flowers, transportation, obituary — the whole package.
- Designated burial funds up to $1,500 per person are also exempt from the Medicaid asset count, separate from the prepaid plan.
A Spend-Down Strategy Families Use
Some families prepay funeral plans for multiple family members as part of their Medicaid spend-down. For example, a couple could prepay both of their funerals — that could be $15,000-$25,000 or more moved from countable assets to exempt status, while ensuring the family is taken care of.
This is not a loophole. It is an explicitly recognized exemption in Medicaid rules. Funeral homes that work with Medicaid families will be familiar with this process.
5. Medicaid-Compliant Estate Planning Strategies
These are the more advanced strategies. Each one is legal and established, but they require careful execution. We strongly recommend working with an elder law attorney for any of these.
Important: The strategies below involve significant legal and financial decisions. Do not attempt them without professional guidance. A mistake can be costly and difficult to undo.
6. Common Mistakes Families Make
These are the mistakes we see over and over. Every one of them is avoidable with the right information.
- Giving the house to the kids right before applying. The 5-year look-back period means this transfer will be discovered and will trigger a penalty period during which Medicaid will not pay for care. This is the single most common and most costly mistake families make.
- Naming "my estate" as beneficiary on life insurance or retirement accounts. This funnels money straight into probate where estate recovery can claim it. Always name a specific person.
- Not setting up POD/TOD on bank and investment accounts. This is free and takes one phone call. Without it, those accounts go through probate.
- Waiting until a crisis to plan. When someone is already in a nursing home or rapidly declining, most of the best planning strategies are no longer available. The 5-year look-back window has already closed.
- Hiding assets. This is Medicaid fraud. It carries criminal penalties including fines and imprisonment. Tennessee reviews 5 years of financial records. They will find it.
- Assuming Medicare covers long-term nursing home care. Medicare only covers up to 100 days of skilled nursing care after a qualifying hospital stay — and only the first 20 days are fully covered. After that, you are on your own unless you have Medicaid or long-term care insurance.
- Not knowing about estate recovery until it is too late. Many families only learn about estate recovery after a loved one has passed and the state files a claim. By then, the planning window is closed.
7. When to Hire an Elder Law Attorney
Some of the steps on this page you can do yourself (beneficiary designations, prepaid funerals). For others, you need professional help. Here is when to call an attorney.
You Need an Attorney For
- Setting up any type of trust (MAPT, irrevocable trust)
- Creating or transferring life estate deeds
- Complex asset restructuring
- Defending against an estate recovery claim
- Filing hardship exemptions
- Medicaid-compliant annuities or promissory notes
- Caregiver agreements (attorney should draft or review)
You Can Do Yourself
- Adding POD/TOD designations at your bank
- Reviewing and updating beneficiary designations
- Prepaying an irrevocable funeral plan
- Paying off debts and making home repairs
- Organizing financial documents
What It Costs
Average costs for elder law services in Tennessee:
- Medicaid planning package: $2,000-$5,000 (includes trust, POA, healthcare directive, and planning consultation)
- Estate recovery defense: Varies, but typically $1,500-$4,000
- Hardship exemption filing: Often included in a planning package, or $500-$1,500 standalone
These fees often pay for themselves many times over. A $3,000 attorney fee that protects a $200,000 home is one of the best investments a family can make.
How to Find One
- National Academy of Elder Law Attorneys (NAELA): naela.org — Search their directory for attorneys in your area.
- Tennessee Bar Association Lawyer Referral: 1-800-486-7037
- Legal Aid of Middle Tennessee: Free or low-cost legal help for qualifying families.
- Ask the right questions: Do they have experience specifically with TennCare? Do they charge a flat fee or hourly? What is included in their planning package?
8. Key Contacts
Keep these numbers handy. You or someone in your family may need them.
TennCare
1-855-259-0701
General TennCare questions, applications, and enrollment
TN Area Agency on Aging
1-866-836-6678
Help for seniors and caregivers, local referrals
Legal Aid of Middle TN
legalaidsociety.org
Free legal help for low-income families
TN Bar Association Lawyer Referral
1-800-486-7037
Find an elder law attorney in your area
More Tools to Help Your Family
Caidee has free tools to help you check eligibility, calculate assets, track your application, and plan ahead.
Disclaimer: The information on this page is for educational purposes only. It does not constitute legal, financial, or tax advice. Estate planning and Medicaid rules are complex, change frequently, and vary based on individual circumstances. The figures, strategies, and exemptions described here are based on current Tennessee law and 2025-2026 federal guidelines, and may change. Always consult with a qualified elder law attorney before implementing any estate planning or asset protection strategy. Caidee is not affiliated with TennCare, the State of Tennessee, or any government agency.