by Jose D. Roman | Aug 25, 2026 | Estate Administration, Medicaid, Medicaid Estate Recovery, Probate
In a published decision issued on April 8, 2025, the New Jersey Appellate Division addressed a significant question involving Medicaid estate recovery: Can the State recover Medicaid benefits paid during a recipient's lifetime from the proceeds of a survivorship medical malpractice claim brought after the recipient's death?
In Estate of Leonor R. Dizon v. State of New Jersey, Department of Human Services, Division of Medical Assistance and Health Services, 481 N.J. Super. 451 (App. Div. 2025). the court answered that question with a clear yes. The decision confirms the consensus understanding of what constitutes an estate asset for Medicaid recovery purposes and serves as an important reminder for families pursuing litigation on behalf of deceased loved ones.
The Background
The decedent, Leonor Dizon, received Medicaid benefits from 2006 through 2018. After suffering injuries from a fall at a hospital, she died ten days later. Following her death, her estate filed a medical malpractice lawsuit that included survivorship claims. Meanwhile, the New Jersey Division of Medical Assistance and Health Services (DMAHS) asserted a Medicaid estate recovery lien of approximately $214,392, representing Medicaid benefits paid on her behalf after age fifty-five. The estate challenged the lien, arguing that the State's recovery should be limited only to any medical expenses recovered from the lawsuit and should not extend to the entire value of the survivorship claim.
The Legal Issue
At the center of the dispute was the distinction between two Medicaid recovery mechanisms: a) Third-Party Liability Recovery and b) Estate Recovery.New Jersey law permits Medicaid to recover medical expenses from settlements or judgments obtained against responsible third parties. This is commonly known as third-party liability recovery. In addition, Federal and state law also require Medicaid estate recovery after the death of certain recipients, allowing the State to seek reimbursement from assets belonging to the deceased recipient's estate. The estate argued that proceeds from a survivorship action should be treated only as third-party recovery funds and therefore subject to more limited reimbursement rules. The State argued that survivorship claims are estate assets and therefore available for full estate recovery.
The Court's Decision
The Appellate Division sided with the State and affirmed the validity of the Medicaid lien. The court concluded that a survivorship cause of action is an asset of the decedent's estate and therefore falls within the broad definition of estate property subject to Medicaid estate recovery. The court emphasized several key principles:
1. Survivorship Claims Are Estate Assets
Under New Jersey's Survival Act, claims that belonged to a person before death survive and become assets of the estate. The estate representative essentially steps into the decedent's shoes and may pursue those claims after death. The court rejected the argument that an unfiled medical malpractice claim was merely speculative and therefore not property. Instead, it concluded that the decedent possessed an interest in the potential claim at the time of death, making it part of the estate.
2. Estate Recovery Is Broader Than Third-Party Recovery
The court explained that Medicaid estate recovery is not limited to reimbursement for injury-related medical expenses. Once a Medicaid recipient over age fifty-five dies, the State may pursue recovery from estate assets for all Medicaid benefits properly paid on the recipient's behalf.
3. Federal Anti-Lien Protections Do Not Apply the Same Way After Death
The estate relied heavily on the United States Supreme Court's decision in Arkansas Department of Health & Human Services v. Ahlborn, which limited Medicaid recovery from a living recipient's settlement. The Appellate Division distinguished that case, finding that the protections applicable to living Medicaid recipients do not prevent estate recovery after death.
Why This Case Matters
This decision has important implications for estate planning and estate administration. Loved ones pursuing survivorship claims should understand that any recovery may be subject to Medicaid estate recovery liens. Failure to investigate outstanding Medicaid claims could complicate estate administration and settlement distributions. Many families assume that a successful medical malpractice or personal injury action will ultimately benefit heirs. This case demonstrates that Medicaid liens may substantially reduce those recoveries when estate recovery laws apply.
The decision highlights the importance of proactive Medicaid planning. Understanding how estate recovery rules interact with litigation claims can help families avoid unexpected consequences and make informed planning decisions.
A Note About Wrongful Death Claims
One important distinction remains. The court noted that wrongful death claims, which seek compensation for the losses suffered by surviving family members, are generally not considered assets of the decedent's estate because those claims belong to the living family members of the deceased. As a result, wrongful death recoveries may be treated differently for Medicaid recovery purposes. Practitioners must carefully distinguish between these causes of action when evaluating potential liens.
Takeaway
The Appellate Division's decision confirms that a survivorship cause of action is an estate asset subject to Medicaid estate recovery. For Medicaid recipients over age fifty-five, the State's recovery rights may extend beyond injury-related medical expenses and reach the broader value of estate assets, including proceeds obtained through survivorship litigation.
Families administering estates that involve Medicaid benefits and pending litigation should carefully evaluate potential estate recovery claims before distributing assets or negotiating settlements.
by Jose D. Roman | Mar 31, 2026 | Estate Administration, Estate Planning, Guardianship, Intestate Estate (No Will), Last Will and Testament, Legal Bulletin, Medicaid, Medicaid Estate Recovery, Medicaid Planning, Medicaid Updates, Trusts
A decision from the New Jersey Appellate Division published June 17, 2025 (In the Matter of G.W.) has clarified a critical and previously unsettled area of law concerning public benefit liens. The court held that a lien issued by the Division of Developmental Disabilities (DDD) is immediately enforceable, while a Medicaid lien cannot be collected until the beneficiary’s death — a distinction with significant consequences for estate planning.
The Background
Gabrielle W., an adjudicated incapacitated adult, received residential services funded by both DDD and Medicaid. When she inherited $600,000 from her sister’s estate, Arc of Bergen and Passaic Counties, her court-appointed property guardian, sought to protect her Medicaid eligibility by transferring those funds to a special needs trust. But standing in the way was a $1,052,304 lien from DDD for the cost of her care — a lien DDD sought to enforce immediately.
The trial court declined to enforce the DDD lien, ruling instead that Medicaid’s future estate recovery rights had priority. The court reasoned it was in Gabrielle’s best interest to preserve her Medicaid eligibility and protect the trust. But on appeal, the Appellate Division disagreed.
The Court's Holding
The Appellate Division reversed the lower court’s order, emphasizing that DDD liens are enforceable immediately under N.J.S.A. 30:4-80.1. These liens attach to the property of a living person who receives services from DDD. On the other hand, Medicaid liens can only be asserted posthumously, pursuant to N.J.S.A. 30:4D-7.2, and only against the estate of the deceased Medicaid recipient.
The court concluded there is no statutory conflict: both liens can coexist, but they operate on distinct timelines. In the case of a living person like Gabrielle, DDD had the only legally viable lien. Medicaid’s recovery rights would not ripen until Gabrielle’s death.
Why This Matters
This case is a clear warning to guardians, trustees, and estate planners: Inherited assets cannot be shielded from DDD repayment obligations simply by invoking Medicaid's future claim rights. If a client receives services from DDD and comes into money, the DDD lien must be addressed promptly — either by repayment or through the statutory compromise process. The court also made clear that a “best interests” argument cannot override a legislatively mandated lien. Courts must enforce the statutes as written.
Planning Tip
If you have a loved one who receives public benefits like Medicaid or services from DDD, careful estate planning is essential. Leaving them an inheritance outright — even with good intentions — can jeopardize their benefits and trigger immediate repayment obligations. Instead, consider using special needs trusts or other protective planning tools to ensure their continued eligibility and long-term care without exposing them to liens or disruptions in services.
The G.W. case illustrates precisely what happens when protective planning is absent. Gabrielle's sister died intestate — without a will — which meant the $600,000 passed to Gabrielle outright under New Jersey's laws of intestate succession. There was no will directing those funds into a Special Needs Trust, no advance coordination with an elder law attorney, and no mechanism to receive the inheritance in a protected form. The result was an immediate lien enforcement proceeding that consumed the entirety of the inheritance and left nothing for Gabrielle's ongoing care needs.
Had Gabrielle's sister executed a will with proper special needs planning, she could have directed her estate — or the portion intended for Gabrielle — into a third-party Special Needs Trust. Unlike a first-party trust funded with the beneficiary's own assets, a third-party SNT is established with someone else's money and carries no Medicaid payback requirement at death. Gabrielle would have received the benefit of those funds without triggering the DDD lien, and without disrupting her Medicaid eligibility.
This is one of the most important and underappreciated points in elder law and disability planning: the person doing the planning is often not the disabled individual, but the family member who intends to leave them something. A parent, sibling, or other relative who has a loved one receiving public benefits should have a will — and that will should account for the beneficiary's disability. Leaving assets outright to a Medicaid or DDD recipient, however well-intentioned, can do more harm than good.
by Jose D. Roman | Jan 21, 2025 | Estate Administration, Medicaid, Medicaid Estate Recovery
Medicaid provides crucial health coverage for individuals and families with limited income and resources, as well as people who require long-term nursing care. However, many recipients and their families may not realize that Medicaid is often entitled to be paid back after the recipient dies. Let's talk about Medicaid Estate Recovery in New Jersey.
What Is Medicaid Estate Recovery?
Medicaid Estate Recovery is a federal requirement that obligates states to recover the costs of certain Medicaid benefits paid on behalf of a recipient after their death. This means that New Jersey’s Medicaid program may seek reimbursement from the estate of a deceased Medicaid beneficiary for services provided.
When Does Medicaid Estate Recovery Apply?
In New Jersey, Medicaid Estate Recovery applies in the following cases:
- Age 55 and Older: Medicaid benefits provided to individuals aged 55 or older are subject to estate recovery. This typically includes expenses related to nursing home care, home and community-based services, and other long-term care costs.
What Assets Are Subject to Recovery?
The state can only recover from assets that are part of the deceased’s probate estate. In New Jersey, this includes assets owned in the individual’s name at the time of death, such as:
- Real property (e.g., a home)
- Bank accounts
- Investments
Assets held jointly, in a trust, or designated with a beneficiary (like life insurance) may not be subject to recovery or recovery may be delayed, depending on the structure of ownership.
Are There Any Exceptions?
- Hardship Waivers: Families may apply for a hardship waiver if estate recovery would create significant financial hardship for survivors.
- Surviving Spouse: Recovery is deferred until the death of the Medicaid recipient’s surviving spouse.
- Dependent Family Members: If the deceased has a surviving child under age 21, or a blind or disabled child of any age recovery is postponed.
- Home Exemptions: If an adult child lived in the home and provided care that delayed the need for Medicaid benefits, the home may be exempt from recovery.
How to Protect Assets from Medicaid Estate Recovery
There are legal strategies to safeguard assets, but they require careful planning well in advance:
- Creating Trusts: Irrevocable trusts can shield assets from probate and Medicaid recovery.
- Gifting Assets: Transferring assets to family members or others, while adhering to Medicaid’s 5-year look back period rules, can minimize exposure.
- Joint Ownership: Structuring assets as jointly owned with right of survivorship can limit probate exposure.
- Exempt Transfers: Some transfers of assets are exempt from Medicaid’s 5-year look back.
Conclusion
These rules are complicated and confusing, even for the average attorney. It is essential to consult with an attorney who specializes in elder law to explore these strategies and implementing a plan that complies with both federal and your state's Medicaid regulations.