- You can challenge and dispute the right of New Jersey to file a lien against an estate
- This article discusses how to appeal an estate recovery lien
- Federal and NJ Medicaid law allows the state to file a lien against the estate of a deceased Medicaid beneficiary
New Jersey files liens to recover payments made on behalf of eligible individuals when the deceased person owns or previously owned assets either as real estate or cash. But how can you challenge the state’s right to recovery? Let me explain a recent case in my office that challenged the States right to file a lien against the Estate of a surviving spouse.
New Jersey Medicaid Laws Authorizing Liens Against an Estate
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 person.” If a state chooses to participate in the program, it must comply with the requirements of this Act, now codified under 42 U.S.C §1396. Id. The New Jersey Medical Assistance and Health Services Act, N.J.S.A. 30:4D-1 to -19.5, authorizes New Jersey’s participation in the Medicaid program. The Division of Medical Assistance & Health Services (“Division”) is a division of the Department of Human Services that operates the Medicaid program in New Jersey by overseeing County Welfare Agencies, who grant or deny Medicaid applications.
As part of the Medicaid program, federal law dictates that a state Medicaid plan is required to seek “adjustment or recovery from the individual’s estate” if that individual is 55 years or older. The federal government defines “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.
Id. at (b) (4) [emphasis added]. New Jersey elected to exercise that option, defining the estate similarly:
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:l- I, 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, tenancy in common, survivorship, life estate, living trust or other arrangement.
Appealing and Challenging Estate Recovery Liens in New Jersey
The law requires that a court 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 a recent case filed by Fredrick P. Niemann, Esq., our law firm challenged the state and its lien against the sale proceeds of the marital home, which required the client 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 affected the Plaintiff’s estate, the estate had standing to challenge the lien.
Read About a Recent Case Brought by Hanlon Niemann & Wright Disputing New Jersey’s Right to File a Lien Against an Estate
In our case title to the house was owned by decedent and his deceased spouse as a tenancy by the entirety pursuant to N.J.S.A. §46:3-17.2 (a) and 17.3. A tenancy by the entirety is like a joint tenancy, “[u]pon the death of either spouse, the surviving spouse [is] deemed to have owned the whole of all rights under the original instrument of purchase, conveyance, or transfer from its inception.” N.J.S.A. §46:3-17.5. But unlike joint tenancies, “[n]either spouse may sever, alienate, or otherwise affect their interest in the tenancy by entirety during the marriage or upon separation without the written consent of both spouses.” N.J.S.A. §46:3-17.4.
The Appellate Division has defined a tenancy by the entirety “as an undivided tenancy in common for the joint lives of the spouses subject to the right of survivorship of each.” Judgment 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.”
Tenancies by the entirety are never specifically mentioned in the definition of the word “estate” under both federal and New Jersey statute. The only time it is mentioned is in the Medicaid estate recovery regulation, N.J.A.C. 10:49-14.1, which requires the Division to “describe the extent of the deceased Medicaid beneficiary’s interest covered by the lien, if known to the Division at the time the lien is filed.” It then lists examples of recording the lien, one of which is when a property is owned as a tenancy by the entirety. The Division treats the 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.” Id.
However, 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 judgment 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 judgment 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.
The plain language of both the federal and New Jersey statutes state that the Defendant shall record a lien against the estate of the recipient of the Medicaid benefits where the “recipient had any legal title or interest at the time of death, to the extent of that interest.” A property owned by tenants by the entirety “is not held by moieties or halves but both husband and wife hold the entire estate as a single person.” When one spouse dies, the other gets it by virtue of his or her right of survivorship. Until that point, each spouse’s property rights in a tenancy by the entirety are nominal and cannot be executed upon.
To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq., a Freehold Township, Monmouth County New Jersey Medicaid Attorney