By Moshe B. Newman, Attorney · Published June 2026
When a family member receives long-term care through Michigan Medicaid, the state may eventually seek reimbursement from that person’s estate after death. The program that does this is called the Michigan Medicaid Estate Recovery Program, or MERP. Understanding how it works — and what planning options exist — can help families protect the assets they have spent a lifetime building.
Under MCL 400.112g, Michigan is required to operate an estate recovery program that complies with Section 1917 of the federal Social Security Act. After a Medicaid recipient dies, the Michigan Department of Health and Human Services (MDHHS) calculates the total Medicaid benefits paid for that person’s care and files a claim against the recipient’s estate. The claim can cover nursing facility services, home and community-based waiver services, and — for recipients age 55 and older — hospital and prescription drug costs.
The amount the state seeks cannot exceed the actual cost of the medical services provided. Funeral expenses and costs of administering the estate take priority over the state’s recovery claim.
This is where Michigan’s law offers an important distinction. Under current law, Michigan defines “estate” for recovery purposes as property and assets that pass through a probate proceeding. Some states use an “expanded estate” definition that reaches assets outside of probate — jointly held property, payable-on-death accounts, and the like. Michigan does not. Assets that bypass probate are generally not subject to the state’s recovery claim.
That distinction is the reason certain planning tools are effective in Michigan. If an asset never enters the probate estate, MERP typically cannot reach it.
Federal and state law prohibit estate recovery in several situations. The state cannot pursue a claim while any of the following individuals survive the Medicaid recipient:
Additional protections apply to a homestead occupied by a sibling who lived in the home for at least one year before the recipient was institutionalized, or an adult child who lived in the home for at least two years before institutionalization and provided care that delayed nursing-home placement. Michigan also allows families to request a hardship waiver in limited circumstances — for example, if recovery would deprive a dependent of housing or if the estate’s primary asset is a family farm or small business.
Michigan applies a 60-month (five-year) look-back period when a person applies for Medicaid long-term care. MDHHS reviews all asset transfers made during the 60 months immediately before the application date. Transfers made for less than fair market value — gifts, for example, or selling property to a child for a nominal price — may trigger a penalty period during which the applicant is ineligible for Medicaid benefits.
The penalty is calculated by dividing the total value of the improper transfers by Michigan’s average monthly cost of nursing-home care (the “penalty divisor”). For 2026, the penalty divisor is $12,216.30 per month. A $122,163 gift made within the look-back window, for example, would produce roughly a 10-month penalty period.
The look-back period applies to Nursing Home Medicaid and Home and Community Based Services (HCBS) waivers. It does not apply to regular Aged, Blind, and Disabled Medicaid.
A Lady Bird deed (formally called an enhanced life estate deed) is one of the most widely used tools for protecting a Michigan home from MERP. The deed names a beneficiary who will receive the property at the owner’s death, but the owner keeps full control during life — including the right to sell, mortgage, or revoke the deed entirely.
Two features make the Lady Bird deed especially valuable in the Medicaid context:
Michigan is one of only a handful of states that recognize Lady Bird deeds. For more detail on how they work and their limitations, see our article on Lady Bird deeds in Michigan.
An irrevocable trust removes assets from the grantor’s ownership entirely. Because assets held in a properly structured irrevocable trust are no longer part of the grantor’s estate, they are generally not subject to MERP. However, transferring assets into an irrevocable trust is treated as a gift for Medicaid purposes and will trigger the five-year look-back penalty if done within 60 months of applying for benefits.
Irrevocable trusts require giving up control, which makes them a more significant commitment than a Lady Bird deed. They are most effective when established well in advance of any anticipated need for long-term care — ideally more than five years before a Medicaid application.
Other strategies that may keep assets outside probate include beneficiary designations on financial accounts, payable-on-death designations, and revocable living trusts. Each has its own implications for Medicaid eligibility, and the right combination depends on the family’s specific circumstances.
The most effective Medicaid asset protection happens years before a crisis. The five-year look-back period means that last-minute transfers can do more harm than good, creating penalty periods at exactly the moment a family needs coverage. Families who address these issues early — as part of a broader estate plan — have far more options than those who wait until a nursing-home admission is imminent.
That said, even families facing an immediate need for care have options worth exploring. The rules around exempt transfers, spousal protections, and hardship waivers can make a meaningful difference, and an attorney familiar with Michigan’s Medicaid rules can help identify them.
At The Legacy Law Firm, we work with Michigan families to structure estate plans that account for the possibility of long-term care and the reach of Medicaid estate recovery. Whether that means executing a Lady Bird deed, establishing a trust, or reviewing an existing plan for vulnerabilities, we approach each situation individually and explain the trade-offs in plain language.
This article is general information about Michigan law, not legal advice, and does not create an attorney-client relationship. Laws and dollar thresholds change; figures current as of 2026. For advice on your specific situation, schedule a consultation.