Inheriting a House with a Medicaid Lien

young family moving into a new home

A Medicaid lien on a home must eventually be satisfied. Typically, a Medicaid lien is placed on real property when an individual is receiving benefits through the Medicaid program during his or her lifetime and still owns a primary residence. Even when the home is exempt, it can become subject to a lien when the Medicaid recipient passes away.

An example is when a Medicaid recipient is in a long-term care nursing facility but still owns a residence. Normally, the residence would make the Medicaid recipient ineligible for benefits.  However, if the Medicaid recipient applies for benefits with “an intent to return home”, the Department of Social Services will process the application and start benefits despite the value of the residence. When an application is processed with an intent to return home, it is very common for the Department of Social Services to place a lien on the property at the time of approval.  If the Medicaid recipient returns home, the lien is lifted.  If the Medicaid recipient dies in the long-term care facility, Medicaid can become a creditor of the estate and also place a lien will remain and must be paid before the beneficiaries of the estate inherit the real property.

Another example of a lien being placed on a home is when the homeowner received Community based Medicaid for several years.  The primary residence is exempt and can remain in the name of the Medicaid recipient; however, upon the passing of the individual, the Department of Social Services can seek to recover any monies that they paid for services on behalf of the Medicaid recipient from the primary residence. The individuals inheriting the house, will need to satisfy Medicaid before receiving their share of the inheritance.

Strategies for Deferring Payment

However, payment of the lien can be deferred under certain circumstances, such as if the lien cannot be paid in full unless the property is sold. The beneficiaries may have to demonstrate that they lack liquidity to pay off the lien or set up a payment schedule. Payment of the lien does not need to necessarily come from the sale of the real property.  The person inheriting can pay off Medicaid with outside monies or mortgage the property.  Before a payment is made, make sure a payoff letter or release is given to avoid any complications in the future.

Estate Planning to Avoid Medicaid Liens

There are estate planning techniques that can potentially avoid a Medicaid lien – if done during the Medicaid recipient’s life.  An estate planning consultation is always a good idea to hear the options and potentially avoid this pitfall.

It is important to note that there are some instances where a lien is incorrectly place on the property – such as when certain dependent relatives live in the home. Additionally, estate recovery could be waived, in whole or in part, if the beneficiary can show that the recovery would result in undue hardship. Consulting with an expert in your area before paying any monies over to the Department of Social Services is advisable.

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Burner Law Group, P.C.

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