Federal Medicaid regulations require a state to seek reimbursement from an individual’s estate for the cost of long-term nursing facility services. Medicaid liens, as they are commonly referred to, are a lien placed against a person’s real or personal property by a State Medicaid Program as a way to secure reimbursement for services.
The New Jersey Medicaid program carries out two kinds of Medicaid liens. The first, a pre-death lien is placed on a recipient’s property before death. Post-death or estate recovery liens are filed after the death of the recipient. In the former, once an individual enters the Medicaid program and is designated as being permanently institutionalized a lien will be filed against the recipient’s property to prevent assets from being transferred to avoid a Medicaid lien. In the latter, the Medicaid program may also file a lien against the recipient’s estate to recover costs of the recipient’s care.
Medicaid liens are not asserted against an individual whose stay in a long-term care facility will not be permanent. When a Medicaid lien is placed against a recipient’s property it does not mean that the recipient will be forced to sell their assets; however, the lien may prevent property from being given away or sold at less than fair market value. Effectively a lien acts as a hold on the property to secure the lien-holder’s interest. Only when the lien-holder enforces the lien can the property be sold to satisfy the lien or the lien is satisfied by payment to Medicaid. Further, estate recovery applies to all Medicaid payments made or services received after an individual is 55 years of age or older. The law also contains exemptions for recipients with less valuable. For example, New Jersey’s Medicaid regulations state that recovery cannot be made against the estate of a deceased recipient if the amount sought is less than $500 or the gross estate of the deceased recipient is less than $3,000. Lastly, Federal Regulations outline specific conditions under which a State Medicaid Program can enforce its lien to seek reimbursement. A lien cannot be enforced until after the death of the Medicaid recipient’s surviving spouse, given that there are no surviving children under the age of 21 or who are blind or permanently disabled.
In some areas, Federal Regulations allow State Medicaid Programs a great deal of latitude regarding how they administer their Medicaid recovery programs. This latitude allows New Jersey to be one of the more strict State Medicaid Lien programs nationwide. For example, New Jersey’s Medicaid Program uses a broader definition of what is considered an attachable estate when compared to Federal Law. The Federal definition of an attachable estate only refers to the probate estate of the deceased recipient, whereas New Jersey has elected to expand the definition of an estate to include the Federal definition of an estate plus “any other real or 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, tenancy in common, survivorship, life estate, living trust or another arrangement.” The main consequence of this expanded definition of an attachable estate is that the New Jersey Medicaid Program will effectively have a greater asset pool to attach when asserting a Medicaid Lien. Particularly concerning families whose estate plans have included certain types of tenancies and trusts to avoid probate. However New Jersey does provide limited exemptions to estate recovery such as life estates that expire upon the recipient’s death are exempt from estate recovery; certain types of Inter Vivos Trusts established by a third party for the benefit of a deceased recipient and certain types of testamentary trusts.
Counsel experienced in estate planning and New Jersey Medicaid liens can assist an individual or their families in the asset preservation strategies.