How to Protect Your Home from Medicaid Estate Recovery in Connecticut

Concerned About Medicaid and Your Estate? Here’s What You Need to Know—Especially in Connecticut

In 2020, KFF estimated that 4.2 million people used Medicaid long-term services and supports (LTSS) delivered in home and community settings and 1.6 million used LTSS delivered in institutional settings. (KFF.org)

Almost 6 million people a year using Medicaid for Long-Term Care services! If you've been researching Medicaid and estate planning, you’ve likely come across terms like estate recovery, life estate, or irrevocable trust.

If your goal is to preserve your home for your loved ones then this article will explain some strategies that help protect a person's home against Medicaid Estate Recovery.

In this guide, we’ll explain how Medicaid Estate Recovery works and how to plan effectively—focusing on Connecticut’s unique rules and exceptions.

What Is Medicaid Estate Recovery?

When an individual receives long-term care benefits through Medicaid, the state may seek reimbursement after that person passes away. This process is known as Medicaid Estate Recovery, and it often targets the most valuable remaining asset: the family home.

The good news? With proactive planning, there are ways to protect your home from estate recovery.

Connecticut’s Rules Are Stricter Than Most

Connecticut has a broader definition of “estate” than many other states. Estate recovery here is not limited to assets that pass through probate—it can also include assets that avoid probate, such as those transferred by certain deeds.

Additionally, Connecticut does not permit “Lady Bird Deeds”, which are used in other states to retain lifetime control of a home while passing it directly to heirs outside of probate. As a result, alternative strategies are needed here. Some states like Texas and Florida do allow lady bird deeds which are extremely convenient in protecting your assets from Medicaid Estate Recovery.

Understanding the 5-Year Look-Back Period

Connecticut Medicaid conducts a 5-year “look-back” review of all financial activity to identify any asset transfers made below fair market value. If a disqualifying transfer is found, Medicaid may impose a penalty period of ineligibility, during which you are responsible for long-term care costs out-of-pocket.

Importantly, not all assets are treated the same. Some are considered countable and must be spent down or protected, while others are non-countable (exempt) under Medicaid rules.

Countable vs. Non-Countable Assets (Connecticut Medicaid)

Asset Type	Countable?	Notes
Checking & Savings Accounts	✅ Yes	Full value is counted.
CDs, Stocks, Bonds, Mutual Funds	✅ Yes	Liquid investment accounts are countable.
Retirement Accounts (IRA, 401(k), etc.)	✅ Yes	Connecticut treats IRAs and similar accounts as countable assets.
Cash Value of Life Insurance	✅ Yes	If face value exceeds $1,500.
Real Estate (Other than Primary Residence)	✅ Yes	Includes rental property, vacation homes, etc.
Primary Residence	⚠️ Conditional	Exempt if equity is ≤ $1,097,000 (2025 limit) and you/spouse live there or intend to return.
One Vehicle	❌ No	One car of any value is exempt for personal use.
Irrevocable Funeral Trust	❌ No	Fully exempt if irrevocably assigned and within reasonable cost limits.
Household Goods & Personal Belongings	❌ No	Standard items like furniture and clothing are exempt.
Prepaid Burial Plots	❌ No	Exempt for applicant and spouse.
Term Life Insurance (No Cash Value)	❌ No	Fully exempt.
VA Aid & Attendance Benefits	❌ No	Excluded from income in Connecticut.
Holocaust Restitution Payments	❌ No	Excluded under federal and Connecticut law.

🔍 Key Takeaway: A Primary Residence is exempt from being counted towards Medicaid Eligibility as long as it is under the Annual limit. Protecting a primary residence above the threshold or any rental/vacation home properties requires a strategy. Continue reading to find out how.

OPTIONS FOR WHEN YOU HAVE MORE THAN 5 YEARS UNTIL MEDICAID ELIGIBILTY

Life Estates: A Straightforward Option

A life estate allows you to retain the right to live in your home for the rest of your life, while naming a beneficiary (often a child) to receive ownership upon your death.

Key Benefits:

• You maintain control during your lifetime.

• Your heirs cannot sell the property without your consent.

• Upon your death, ownership transfers automatically—avoiding probate.

In Connecticut, a properly structured life estate may shield your home from estate recovery, provided it’s established well in advance of applying for Medicaid.

⚠️ Note: Life estate transfers are subject to Medicaid’s 5-year look-back period. Transferring the property too close to the application date may result in a penalty period of ineligibility.

Irrevocable Trusts: A More Flexible Alternative

Placing your home in an irrevocable trust is another powerful option. This approach provides more flexibility than a life estate and may offer greater protection in the long run.

Advantages:

• Keeps your home out of your countable estate for Medicaid purposes (if done at least 5 years in advance).

• Can reduce capital gains taxes for your heirs.

• Allows proceeds from the future sale of your home to remain protected within the trust.

✅ Like life estates, irrevocable trusts are also subject to the 5-year look-back period.

Connecticut-Specific Medicaid Considerations

Income and Asset Rules:

• Most income types count, but VA Aid & Attendance and Holocaust restitution payments are excluded.

• IRAs are treated as countable assets in Connecticut.

• Home equity up to $1,097,000 (2025) is exempt if the applicant or spouse resides there or intends to return.

  
  

For Married Couples:

• Only the applicant’s income is considered for Nursing Home Medicaid.

• The non-applicant spouse can retain up to $157,920 in assets (known as the Community Spouse Resource Allowance).

QPRTs: A Strategic Option for Medicaid and Estate Planning

Another advanced option to consider is the Qualified Personal Residence Trust (QPRT). While often associated with estate tax reduction, QPRTs can also play a role in long-term Medicaid planning.

How It Works

A QPRT allows a homeowner to transfer their primary residence into a trust while retaining the right to live in the home for a set number of years. After this “retained income period” ends, the home passes to the beneficiaries—typically the children—at a reduced taxable value.

While the main goal of a QPRT is to minimize estate and gift taxes, the timing of this transfer is crucial when used in Medicaid planning.

QPRTs and the Medicaid Look-Back Period

Medicaid’s 5-year look-back period applies to any transfer of assets for less than fair market value. If the QPRT term expires within that five-year window before applying for Medicaid, the state may view it as an uncompensated transfer—triggering a penalty period.

However, if the QPRT is established and the term ends outside the look-back period, the property may no longer be considered part of your estate for Medicaid eligibility purposes. This makes it a potentially effective way to preserve your home—but only with proper planning and long-term foresight.

Additional Considerations

• After the QPRT term ends, the grantor must pay fair market rent to continue living in the home. This could affect Medicaid eligibility if the payments increase the grantor's income.

• A poorly timed QPRT could result in penalties, tax complications, or even loss of eligibility if not handled properly.

  
  

OPTIONS FOR WHEN YOU HAVE LESS THAN 5 YEARS TO QUALIFY FOR MEDICAID ELIGIBILITY

Exceptions to the Look-Back Rule

Protecting your home:

Some asset transfers are permitted during the 5-year look-back period:

✅ Sibling Exemption

You may transfer your home to a sibling without penalty if:

• The sibling lived in the home for at least one year immediately before your institutionalization, and

• They have an ownership interest in the property.

  
  

✅ Child Caregiver Exception

You can transfer your home to a child without penalty if:

• The child lived in the home for at least two years before your institutionalization, and

• They provided care that helped delay the need for nursing home care.

  
  

❌ Gifting Without an Exemption

Transferring your home to a child without meeting these criteria will likely result in a penalty if done within five years of applying for Medicaid.

Why Professional Medicaid Planning Matters in Connecticut

Because of Connecticut’s stricter rules and the absence of tools like Lady Bird Deeds, working with a qualified professional is essential. An expert can help you:

• Navigate the 5-year look-back period safely

• Identify countable vs. exempt assets

• Select the right strategies for your situation

• Protect your home and financial legacy for your loved ones

  
  

Who Can Help?

1. Elder Law Attorneys

These attorneys specialize in legal planning for seniors, including:

• Estate and retirement planning

• Wills, powers of attorney, and guardianship

• Trust creation and sometimes Medicaid appeals

Note: Not all Elder Law Attorneys handle Medicaid planning. Cost: $195–$500/hour, depending on complexity.

2. Medicaid Planners

Non-attorney professionals who focus exclusively on Medicaid strategies:

• Assist with spend-down and asset protection

• Provide trust and exemption planning

• Handle hardship exemption cases

Cost: $5,000–$10,000 depending on the scope of work.

3. SHIP Volunteers

The State Health Insurance Assistance Program (SHIP) offers free assistance from trained volunteers. While experience may vary, it’s a helpful first step.

If you're in Connecticut, click here to visit their site.

4. Area Agencies on Aging

These local organizations provide resources on long-term care and may assist with Medicaid applications.

For residents of Southeastern Connecticut, click here to visit their site.

Final Thought: Start Early to Protect More

The earlier you begin planning, the more options you’ll have. If you’re concerned about Medicaid eligibility or estate recovery, now is the time to start the conversation—with your family and with a qualified advisor.

About The Author

Marc Lowe is the Founder & President of In The Money Retirement Planning. He is a Certified Financial Planner and member of NAPFA National Association of Personal Financial Advisors, XY Planning Network & Fee-Only Network. He works with retirees and those approaching retirement. He has over a decade of experience helping these folks grow their net worth, organize their finances and build better lives for themselves and their families.

Book a Free Initial Consultation

The information presented in this Presentation is the opinion of the author and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through In The Money Retirement, an investment adviser registered with the state of Connecticut. The information linked to on third-party sites is being provided strictly as a  courtesy and convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. When you access these websites, you are leaving our website and assume any and all responsibility and risk for use of the web sites you are visiting.The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.