A Medicaid lien on a Medicaid recipient’s property works to reimburse the state for Medicaid benefits provided to the recipient, such as nursing home coverage. Even if a home is exempt while the recipient is alive, the home can become subject to the lien once the Medicaid recipient passes away.
Right To Reimbursement
Indiana has the right to reimbursement for benefits provided to a recipient through long-term care Medicaid. The state may recover its expenses through a Medicaid lien or Indiana’s Medicaid Estate Recovery Program.
In Indiana, once a lien is placed on the property, the state may seek recovery when the recipient passes away or if the recipient is permanently institutionalized and none of the following individuals live in the home:
- A spouse
- A child under 21
- A child of any age who is blind or 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
Once the above-noted people move out, the recipient passes away, or the property is transferred to a non-exempt individual (that is, someone other than the recipient’s adult children), the individual receiving the property must address the Medicaid lien to clear the title to the property.
Estate Recovery Lien
Indiana 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.
- Any money remaining in the recipient’s bank account regardless of whether the account is payable on death.
- Any money remaining in the recipient’s nursing home account as of the date of death.
- Any funds in a Qualified Income Trust as of the date of death.
- Any funds remaining in a funeral trust after the funeral has been paid in full.
- Annuities purchased after May 1, 2005.
- Assets in a revocable trust if the assets were transferred into the trust after May 1, 2002.
The Medicaid lien is only perfected (meaning, it is due to the state) once the property is transferred. In some situations, the lien may be avoidable or deferred.
Deferment Of Payment
If you received a home with a Medicaid lien, you are generally required to pay the lien to clear the title to the property. In most situations, beneficiaries cannot afford to pay the lien in total, so they may need to sell the property or take out a mortgage to pay off the lien.
Additionally, in some circumstances, if the beneficiary demonstrates that they lack the liquidity to pay off the lien, they may set a payment schedule with the state to pay off the lien. To determine which option is best for you, contact an experienced Medicaid planning attorney.
Undue Hardship Exception
To be eligible for the undue hardship exception, you must meet stringent requirements. Under Indiana law, undue hardship exists only if enforcement of the State’s Medicaid lien would result in at least one of the following:
- Causing a beneficiary of the decedent’s estate to become eligible for public assistance;
- Causing a beneficiary of the decedent’s estate who is currently eligible for public assistance to remain dependent on that public assistance;
- The complete loss of an income-producing asset or assets when:
- The beneficiary of the decedent’s estate has no other source of income, and
- The beneficiary’s income does not exceed 100 percent of the poverty level as determined annually by the Department of Health and Human Services.
- Other compelling circumstances as determined on a case-by-case basis.
However, undue hardship does not exist when fulfilling the Medicaid lien solely results in losing a preexisting standard of living. The hardship exemptions exist to ensure that the requirement of fulfilling the Medicaid lien would not result in the person paying the lien becoming reliant on the state.
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.
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.
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