Are you looking into applying for Medicaid in Indiana? Do you currently own a home? If you answered yes to both of these questions, this article explains your home’s effect on your eligibility for Medicaid in Indiana.

What Is A Lien?

Typically, a lien gives you an interest in someone’s property in response to their unpaid debts to you. The lien usually stays in effect until that debtor satisfies their debts to you.

What Is A Medicaid Lien?

Medicaid liens are based on the presumption that equity in property belonging to Medicaid recipients should be used to offset the Medicaid recipient’s health care costs. There are two kinds of Medicaid liens – a pre-death lien, also known as a Tax Equity and Fiscal Responsibility Act (TEFRA) lien, and a post-death lien, also known as an estate recovery lien.

Tax Equity And Fiscal Responsibility Act

Since TEFRA passed in 1982, states have had the option to use liens to prevent Medicaid long-term care recipients from giving away assets, specifically the home they no longer reside in because of being institutionalized.

TEFRA liens are the only type of lien that may be placed before the death of a Medicaid recipient whose benefits have been paid. As a result, these are considered pre-death liens. They only apply to permanently institutionalized individuals; however, a TEFRA lien cannot be used to recover anything until the Medicaid recipient dies. There are also current restrictions on placing TEFRA liens to protect an individual’s home when needed by the recipient or their immediate family.

Tax Equity And Fiscal Responsibility Act Limitations

In Indiana, to obtain a TEFRA lien, the state must find the recipient permanently institutionalized (e.g., not returning home) and allow the recipient an opportunity for a hearing on that finding. If the recipient is discharged from the institution, the lien must be released. Moreover, no lien may be placed if any of the following relatives live in the home:

  • A spouse
  • Child under 21
  • A child of any age who is blind or permanently disabled
  • A sibling with an equity interest in the home who has resided there for at least one year before the recipient’s admission to an institution

A TEFRA lien presumes that any attempt to transfer the property shows that the house is no longer the recipient’s residence or any of the above-stated qualified individuals, resulting in the equity becoming available for consideration as a source of payment. However, the TEFRA lien does not interfere with the recipient’s home use while they or the above individuals continue to reside there.

Repaying Medicaid

With this lien, Indiana may require the recipient to use the home’s equity to repay Medicaid for prior expenses paid towards long-term care on the recipient’s behalf. If there is remaining equity in the hands of the recipient, it may cause them to exceed Indiana’s Medicaid asset limit. They may have to use the funds to cover future long-term care expenses out of pocket until assets are below Medicaid’s asset eligibility level.

If a recipient passes away with a TEFRA lien still on their home, Medicaid recovery through the lien occurs as part of the estate administration process. If the property is transferred to a non-protected person (e.g., best friend), the individual receiving the property must pay off the Medicaid claim to clear the property’s title. For some, this may be impossible, which will require them to take a mortgage on the home or sell the property to satisfy the Medicaid claim.

Estate Recovery Lien

Under Indiana’s Medicaid Estate Recovery Program, the state may require liquidation and payment of the following assets to recover costs paid towards the recipient’s long-term care:

  • Real property, including property conveyed to the recipient’s survivor through joint tenancy with the right of survivorship.
  • Funds in the recipient’s bank account irrespective of whether the account is jointly owned or has a payable on death (POD) provision.
  • Funds in the recipient’s nursing home account as of the date of the recipient’s death.
  • Funds in a Qualified Income Trust as of the date of the recipient’s death.
  • Funds in a recipient’s funeral trust after the funeral expenses have been paid in full.
  • Annuities purchased after May 1, 2005, whether or not Indiana is named as a beneficiary.
  • Funds in the recipient’s revocable trust after May 1, 2002.

Medicaid Attorney In Indiana

Are you worried about what a Medicaid lien may mean for the future of your home should you apply for Medicaid nursing home benefits? Reach out to an experienced Medicaid planning attorney at Hawkins Elder Law for guidance. Contact us today by calling (812) 268-8777 or online for a free consultation.

About The Authors

Jeff R. Hawkins and Jennifer J. Hawkins co-author this blog with Thomas E. Hynes, a lawyer admitted to practice in Pennsylvania, New Jersey and Florida who has a background in estate planning and elder law. Jeff and Jennifer are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers. They are also active members of the Indiana State Bar Association and the Indiana Chapter of the National Academy of Elder Law Attorneys (NAELA). Jeff is also a member of the Illinois NAELA Chapter.

Both Hawkins are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois.

Jeff is a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation. He is also a member of the Illinois State Bar Association and he served as the 2014-15 President of the Indiana State Bar Association.

More Information

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