The Law of Priority When Dealing with Medicaid Liens

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

A Medicaid Lien is deemed a “preferred claim, with a priority status under subsection c. of N.J.S.A. 3B:22-1. It ranks right up there with debts and taxes with preference under Federal or State law.” N.J.A.C. 10:49-14.1(e). The statute of ranks” debts and taxes with preference under federal law or the laws of this State” as a priority claim under N.J.S.A. 3B:22-2. This means that reasonable funeral expenses, the costs and expenses of administration, and debts for services rendered by the Office of the Public Guardian for Elderly Audits will take higher priority over a Medicaid lien. However, a Medicaid lien is to be satisfied before any reasonable medical expenses for the last illness of the decedent, judgements entered against the decedent, and all other claims excluding a mortgage.

There are four situations when a Medicaid lien will not be pursued by the State for repayment. The first way is if a lien is not placed on the property. This is seldom the case. The law requires N.J. to pursue a lien if there is no surviving spouse, no surviving child under age 21 or child who is blind or permanently disabled. The lien is in excess of $500, and the decedent’s estate is greater than $3,000. Another exception to lien collection is if the State decides (at its sole discretion) that recovery would not be worth pursuing. N.J.A.C. 10:49-14.1 (i). Undue hardship is another way to stop pursuing the lien. If the person can prove that “the estate subject to recovery is or would become the sole income-producing asset of the survivors, and pursuit of recovery is likely to result in one or more of those survivors becoming eligible for public assistance and/or Medicaid benefits” at a fair hearing, the division will not pursue its claim. N.J.A.C. 10:49-14.1(h)(1).

The last method to stop pursuit of the lien is of interest, section (g) of the regulation provides that;

If a family member of a deceased Medicaid beneficiary has, prior to the beneficiary’s death, continuously resided in a home owned by the beneficiary at the time of the beneficiary’s death, and that home was the beneficiary’s primary residence, and was and remains the family member’s primary residents, the Division may record a lien against the priority, but will not enforce the lien until the property is voluntarily sold, or the resident family member either dies or vacates the property.

If a child or family resides continuously with the parent, the Division doesn’t have to record a lien, and if they do, they can’t enforce it until the child leaves the property. And if the child sells the property, “even when the statutory conditions for lien filing and recovery are met, recovery shall not be pursued against property held by any bona fide purchaser who has paid fair market value for the property, but shall be sought from the estate.” N.J.A.C. 10:49-14.1(k). so the lien won’t be enforced at all against the house, allowing the  mortgage to be repaid.

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.