Medicaid Liens And Estate Recovery Under New Jersey Laws

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Medicaid Attorney

Over half of all Medicaid spending today is for residents of the state who are not poor enough to qualify for welfare but who lack the funds to private pay their long term health care, particularly custodial care at home or skilled nursing care at a nursing home or assisted living residence.

Many, if not most, long-term care recipients become eligible for Medicaid by spending down a lifetime of savings and resources and using most of their monthly income to pay as much as they can towards the high costs of nursing home and/or home care. Under New Jersey’s current laws, they may qualify for Medicaid despite having equity in a home, which is protected as long as it serves as their principal residence or that of family members, ie., siblings, minor or adult incapacitated child.

Medicaid liens are used by the state to protect Medicaid’s interest in the home and its right to recover the funds it paid for long term care costs before the property can be sold. Liens are not used to force a beneficiary to sell their property. The state can, however, prevent the property from being gifted away or sold at less than fair market value. By imposing a lien on the home, Medicaid guarantees itself that the equity in the home is available to reduce overall Medicaid spending in the state.

Significance of the Home in Liens and Estate Recovery

Liens are most controversial when applied against the home of a Medicaid recipient. The family home is generally the most significant asset a person owns and can still qualify for Medicaid. The family home is prized by applicants and their families for reasons often unrelated to the economic fair market value of the asset. Often times, the home is the only asset of value remaining in the estate of a deceased Medicaid recipient, since all other available resources are required to be spent down to not more than $2,000.

What is a Medicaid Lien: Definition

A lien is the right to take someone else’s property if an obligation is not satisfied. It gives to the lien holder (called a creditor) an interest in the property that lasts until the property owner’s debt to the creditor is satisfied or otherwise discharged. The right to collect a lien and the procedures used to enforce that right are established under New Jersey property laws which dictate the means and manner under which creditors have the right to file a claim against any real and personal property.

How Medicaid Liens Work

A Medicaid lien establishes the state’s right to make a claim against all real and personal property of a Medicaid beneficiary and other assets within the estate of a Medicaid recipient after his or her death or the death of their spouse.

There are two kinds of Medicaid liens – pre-death liens and post-death or estate recovery liens.

Pre-Death Medicaid Liens

Since 1982, New Jersey has had the option to use liens to prevent Medicaid long-term care recipients from giving away assets – specifically a home in which they no longer reside – before they are used to offset long-term care expenses paid by Medicaid on their behalf. When the state elected to use this option, its financial interest was given priority over the beneficiaries and interests of adult children or others under a Last Will or Revocable Living Trust who reside in or claim an interest in the homes of institutionalized Medicaid recipients who no longer live in them and may never do so again.

Pre-death liens are the only type of lien that may be placed on real estate and property prior to the death of a Medicaid recipient. For this reason, they are also called “pre-death” liens. They only apply to permanently institutionalized individuals, not Global Options Medicaid beneficiaries. While estate recovery does not begin until the Medicaid recipient dies, a pre-death lien may be placed against the real property of a recipient of any age who is an inpatient of a nursing facility, intermediate care facility for the mentally impaired or other medical institution, if it has been determined that he or she cannot reasonably be expected to return home. New Jersey must afford the individual an opportunity for a hearing on that finding and are required to dissolve a lien if the Medicaid recipient returns home.

Restrictions on the placement of pre-death liens – all aimed at protecting homes against Medicaid claims when they are needed by Medicaid recipients or certain close family members – are shown below.

In effect, the imposition of a pre-death lien does not interfere with the recipient’s use of the home. However, if a Medicaid recipient chooses to transfer their house to someone else (whether by sale, gift, or other means), the state can compel them to use the equity value in the home to repay the state all the money it spent for the long-term nursing care and other services of the person.

If the property is sold, Medicaid’s claim must be satisfied first after any priority liens. The maximum amount Medicaid can collect is either the amount spent on the individual’s behalf or the individual’s equity interest based on the home’s fair market value, whichever is less. The Medicaid recipient receives whatever amount, if any, is left of the sale proceeds.

While a Medicaid lien does not force the long-term care recipient to sell the home, circumstances of individual cases can produce the same result. For example, the recipient may not have sufficient funds to pay property taxes, insurance, or other home-related expenses after spending most of his or her income to meet Medicaid’s monthly share-of-cost payments for long term care. If the individual sells the home, then the equity interest, based on the property’s fair market value and net sale proceeds, becomes a countable asset and triggers Medicaid recovery.

If the home owner dies with a lien still on the property, Medicaid recovery occurs as part of the probate and estate administration. If the property is conveyed by the estate to someone without a protected interest in it (e.g., an adult disabled child or caregiver child), the transferee must pay off Medicaid’s claim in order to receive a clear title to the property. Heirs who lack the means to pay Medicaid’s claim must either obtain a loan or mortgage to keep the home in the family or sell the property to satisfy the Medicaid claim.

Post-Death Liens

Federal guidelines allow New Jersey broad flexibility in the design of their Medicaid estate recovery programs including how and when the state will assert its right to recover Medicaid expenses from both probate and non-probate assets. New Jersey is supposed to file post-death liens against the real and personal property of persons who were permanently institutionalized and those who received Medicaid services after age 55, whether or not they were institutionalized. Post-death liens are often a part of the probate process.

In these instances, the designated survivor(s) can inherit the home and other assets to use as they wish, without having to reimburse New Jersey for the expenses paid for their parent while collecting Medicaid institutional care benefits.

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



Ownership and Title Issues Affecting a Decedents’ Estate: A Primer for Executors and Administrators of an Estate Subject to Probate in New Jersey

By Fredrick P. Niemann, Esq., a New Jersey Probate Attorney

Often, an executor or administrator questions how he or she should transfer real estate to beneficiaries. Does each executor have legal title to the property as a fiduciary pending its transfer to beneficiaries or does ownership automatically pass to the named beneficiaries upon the death of the owner? These are really good questions.

New Jersey laws provide that “Upon the death of a decedent, his or her real and personal property devolves (“devolves” means “passes to” as in legal ownership) to the persons named by his/her will …or in the absence of testamentary disposition (“testamentary disposition” means dying without a will or trust), to his or her heirs…” Please note that I hate big legal words so I’ve given you the plain language translation of the law(s).

So what this means to you as executor or administrator “In the absence of contrary language in the Last Will or Trust… every fiduciary (if you’re an executor or administrator, you’re a fiduciary) shall, in the exercise of good faith and reasonable discretion, have the power… (1) to acquire or dispose of an asset, including real or personal property… at public or private sale…”

What this means to you is that until you complete the estate or you are terminated for some reason as a personal representative, you have the same power over the title to property in the estate that the named heirs at law have subject to the claims of estate creditors and others interested in the estate. You can exercise your power without prior notice, hearing, or order of a court; or the directives of the beneficiary.

So, who must execute the deed in order to legally transfer ownership to beneficiaries?

Is it the executor or administrator or the beneficiaries or heirs? The answer is the administrator, executor or trustee.

But Be Cautious Of Death Taxes Other Liens

Be sure to pay the New Jersey Transfer Inheritance Tax. The tax is a lien good for 15 years from the date of the death of the decedent. The lien attaches to all taxable transfers. In order to transfer title, you need a tax waiver. This waiver, when received is recorded in the county land records (ie., County clerk’s office).

Then there is the New Jersey Estate Tax — N.J.S.A. 54:38-1 et seq. This tax differs conceptually from the inheritance tax. It is a lien with respect to estates of decedents dying after Dec. 31, 2001 and has a duration of 20 years. This tax applies to estates valued in excess of $675,000 or more. There are only two exemptions from the payment of this tax — non-resident decedents and surviving spouses.

Again, to give title to the heir you need proof of payment and recording the waiver with the County Clerk.

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


Medicaid Myths Part Three: Estate Recovery

house tax recoveryMyth: “I heard I have to turn over my home to the state in order to get Medicaid.”

This fear, or something similar that involves worry that the state will swoop in and take property, furnishings, car, or home out from under a person who needs Medicaid, is common among clients who come in to see me. It is a myth, based on a misinterpretation of Wisconsin’s Medicaid recoupment law.

The truth is that you never have to give up your house to qualify for Medicaid. In most cases, the home will be a resource that does not count in the Medicaid eligibility process. It’s often unfortunate that people have been given bad advice to sell their homes and use the proceeds  to pay for nursing home care before applying for Medicaid, when they may have been able to qualify while still owning the home.

Truth: You never have to give property to the state as a condition of Medicaid eligibility. Period.

That being said, if you receive Medicaid in a nursing home, or hospital where you have been there for more than 30 days, AND you own a home, AND there is no reasonable likelihood that  you will ever return home, the state may be able to place a lien on your home.  This does not apply in all cases however. For example, if a spouse lives in the home, the state may not obtain a lien. There are other exceptions as well.

If the state is allowed to place a lien on your home, then the lien could be enforced if, for example, the house is sold in a probate of your estate.

The lien cannot be enforced if certain people are living in the house, such as a child who lived with and  took care of you for two years prior to the time you went into the nursing home, and who continues to live in the home.

Allowing a lien to be placed on the home is not the worst thing in the world. This is because the lien is for the cost of nursing home care at the Medicaid rate.  Compare the following:

Joe’s house is worth $200,000 free and clear. 

If Joe sells his house and uses the proceeds to pay for nursing home care at the private pay rate of $9000 per month, he will exhaust the proceeds in about 22 months.  There will be nothing left. 

However, if he keeps the home and it is considered exempt because he intends to return home (even if that intent is not reasonable) then he can qualify for Medicaid without selling the home. At some point a lien will be placed on the home. 22 months of care at the Medicaid rate of about $5500 is $121,000. The lien would be based on the Medicaid rate.  After the same amount of time has elapsed, if Joe chooses Medicaid even with the lien,  he still has $79,000 worth of equity in his home.  This increases the chance that if he dies, there will still be equity in the home to leave to his heirs. 

The takeaway is this:

1) If worry about the state taking your house is preventing you from considering Medicaid,  that worry may be based on a myth.

2) If a caseworker or nursing home social worker tells you that you have to sell the house to pay the nursing home, get a second opinion. Selling the house will lead to you paying the nursing home at a higher rate than if you kept the house.

You can learn the truth by talking with an elder law attorney.





About these ads

div { margin-top: 1em; } #google_ads_div_wpcom_below_post_adsafe_ad_container { display: block !important; }

Payments to Agents under Power of Attorney are Considered Gifts

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Medicaid Attorney

Payments to a child or children who are the power of attorney for a parent are often examined when applying for Medicaid. In order for a payment to a child or third party to not be considered a gift, the power of attorney document must specifically allow compensation for the agent. In addition, the compensation has to be similar to what a person would pay a third party to do the same tasks. Compensation should not be in a lump sum(s) and the recipient should report the payments as income on their State and Federal income tax returns.

A case currently on appeal In New Jersey deals specifically with payments to a child/power of attorney.

In V.M. v, Division of Medical Assistance and Health Services, et al., OAL Docket No, 5769-09 (March 22, 2010, Union County), a New Jersey administrative law judge ruled that a Medicaid applicant’s payment to his adult children for services rendered under a power of attorney was properly considered a gift and subject to a penalty period.

V.M., an elderly widower, executed a power of attorney, appointing two of his four adult children as co-agents. In January 2008, after having been admitted to a nursing horns and approved tor Medicaid nursing home benefits, V.M. sold his former home and received approximately $202,748 in net proceeds. The co-agents reported the sale and receipt of the proceeds to Medicaid. Later they filed an action in Superior Court seeking compensation of $102,555.55 for services they had rendered over the preceding five or so years, including taking their father to family gatherings, doctor visits, the bank and to dinner, plus $24,400 for expenses incurred on their father’s behalf. Medicaid was not notified of the action. As the matter was uncontested, the Superior Court eventually awarded the co-agents the amounts they had requested.

Subsequently, Medicaid terminated V.M.’s nursing home benefits, concluding that the payment to his adult children for services rendered under the power of attorney was actually a gift. V.M. appealed, asserting that because the Superior Court had authorized payment to the co-agents for the services, the agency was precluded from treating the payment as an uncompensated transfer and denying benefits.

An administrative law judge (ALJ) disagreed and affirmed the denial of Medicaid benefits. The ALJ notes that the Superior Court had not ruled on Medicaid eligibility but rather on compensating agents under a separate state law. Accordingly, the ALJ concluded that the agency is entitled to consider the payment to the co-agents in the context of the Medicaid eligibility rules and to thereby find that in light of the lengthy time that the co-agents were not compensated for their services, the payment was actually an uncompensated transfer.

If you have questions regarding a power of attorney and payment of commissions to the personal representative, please contact Fredrick P. Niemann, Esq. toll-free at 855-376-5291 or email him at