Objecting to a Lien Filed By the State of New Jersey to Recover Medicaid Payments for Long Term Care

HNWElder Law, Medicaid Eligibility and Asset Protection Planning

  • Medicaid Benefits are available to pay for long term care costs for eligible individuals
  • Upon death the state can file a lien against the estate of a Medicaid beneficiary
  • This article discusses how to challenge estate recovery if a lien is filed by the state

NJ MedicaidNew Jersey files liens against the estates of persons who received Medicaid benefits for health care costs if the person owns or previously owned property such as real estate, cash etc. Can the estate challenge the states right to recovery? The answer is “yes”, let me explain a recent case in my office.

Estate Recovery and NJ Medicaid Benefits

Medicaid was created under Title XIX to the Social Security Act “for the purpose of providing federal financial assistance to States that choose to reimburse certain costs of medical treatment for needy persons”

As part of the Medicaid program, federal law requires that New Jersey’s Medicaid laws seek recovery from an individual’s estate” if that individual was at least 55 years or older at the time of his/her death.


What Constitutes an “Estate” for Estate Recovery?

The federal government defines an “estate” to include:

(A) …all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law; and

(B) may include, at the option of the State… any other Real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.

New Jersey has elected to exercise that option, defining the estate the same way:

As used in this section, “estate” includes all real and personal property and other assets included in the recipient’s estate as defined in N.J.S. 3B: 1-1. As well as any other real and personal property and other assets in which the recipient had any legal title or interest at the time of death, to the extent of that interest, including assets conveyed to a survivor, heir or assign of the recipient through joint tenancy in common, survivorship, life estate, living trust or other arrangement.

N.J.S.A. 30:4D-7.2.

However, the law requires that a court under N.J.S.A. 30:4D-7.8 examine “the validity or the facts and circumstances surrounding the entry” of Medicaid liens provided the person bringing the action be “affected in any manner, whether directly or indirectly.” In this case the Division asserted its lien against the sale proceeds of the marital home, requiring the title company to escrow almost half of the net sale proceeds from the estate of a deceased person who never received Medicaid benefits. Because the Division’s claim affects the plaintiff’s estate, the estate has standing to challenge the lien.

Hanlon Niemann & Wright Represented a Client Disputing the State’s Right to File a Lien

Our clients were married and owned a house together. The house owned by the client and his deceased spouse was as a tenancy by the entirely pursuant to N.J.S.A. §46:3-17.2 (a) and 17.3. Like a joint tenancy, “[u]pon the death of either spouse, the surviving spouse is deemed to own all of the house because unlike joint tenancies, “[n]either spouse may sever, alienate, or otherwise affect their ownership interest in the tenancy by entirety during the marriage or upon separation without the written consent of both spouses.” Judgement creditors cannot demand a partition of the house while the non-debtor spouse lives should it have a claim against the interest of the debtor spouse. Because of this, “the value of one spouse’s interest in the tenancy by the entirety during the marriage is ordinarily limited to the survivorship right and is regarded as having nominal value only.”

In our case N.J.A.C. 10:49-14.1, required the State to “describe the extent of the deceased Medicaid beneficiary’s interest covered by its lien.  The State treats a tenancy by the entirety identically as a joint tenancy with a right of survivorship, stating. “The lien shall state that it encumbers all of the property.”

We disagreed.  A tenancy by the entirety differs from a joint tenancy with a right of survivorship. Our courts have held that there is a nominal value to a person’s interest in a property when owning it as a tenant by the entirety. It’s why a judgement creditor cannot execute upon his or her interest to the property when both spouses are alive.  Upon the death of the debtor spouse, the property, by right of survivorship, is vested in the survivor’s name, and a judgement creditor cannot execute upon the property until the death of the non-debtor spouse. If the community spouse dies before the Medicaid beneficiary spouse, the entire value of the house is available to the State to recoup for paid Medicaid benefits under the federal and state definitions of the word “estate.” But the same cannot be said if the Medicaid beneficiary dies before the community spouse, since there is nothing the Division can execute upon “at the time of death, to the extent of that interest.” N.J.S.A. 30:4D-7.2. This is the situation in this case, with the Medicaid beneficiary having died before her husband, the community spouse. Therefore, the Division’s regulation is void, as an assertion of the lien is illegal as a matter of statute and case law.

To discuss your NJ Medicaid Estate Recovery matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Medicaid Attorney

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