Short Answer

If North Carolina Medicaid denies an undue hardship waiver, its estate-recovery claim stands and must be paid from estate assets. When the only asset is the home, a personal representative can ask the Clerk of Superior Court to authorize a mortgage (refinance) or a sale to create funds to pay the claim. Heirs cannot safely refinance or transfer the home within two years of death without proper estate steps, because creditor rights—including Medicaid—take priority.

Understanding the Problem

You’re in North Carolina, inherited a home with siblings, and Medicaid filed an estate-recovery claim. You plan to seek an undue hardship waiver based on long‑term occupancy. If the waiver is denied, can you refinance the home—after siblings deed their interests to you—to pay Medicaid, without opening a full estate?

Apply the Law

Under North Carolina law, Medicaid can recover certain costs from a decedent’s estate. Real property passes to heirs at death, but it remains available to pay estate debts and claims. If the waiver is denied and the estate lacks cash, the personal representative (PR) may petition the Clerk of Superior Court to authorize a mortgage (refinance) or to sell the property to create funds to pay claims. Transactions by heirs within two years of death are restricted unless a PR has given notice to creditors and joins the transaction. The main forums are the Clerk of Superior Court in the county of domicile (to open the estate) and, for real estate actions, the county where the property sits. A PR who publishes a notice to creditors triggers a typical 90‑day window for claims to be presented.

Key Requirements

• Valid Medicaid claim: If hardship is denied, the claim must be satisfied from estate assets according to statutory priorities.
• Proper authority to encumber or sell: A PR must obtain court authority to mortgage or sell estate real property if needed to pay claims.
• Creditor‑protection timing: Within two years of death, heir transfers or mortgages are ineffective against creditors unless a PR has given notice to creditors and joins the deal.
• Notice to DHHS: The State is a known creditor; the PR should mail notice to start the claim deadline.
• Priority and application of proceeds: Costs of administration and secured liens come first; Medicaid recovery is paid in its statutory class.

What the Statutes Say

• N.C. Gen. Stat. § 108A-70.5 (Medicaid estate recovery) – Authorizes recovery and hardship waivers.
• N.C. Gen. Stat. § 28A-17-11 (Order to lease or mortgage real property) – Clerk may authorize a mortgage when in the estate’s best interest.
• N.C. Gen. Stat. § 28A-17-12 (Heir sales/mortgages within two years) – Heir transfers within two years are void as to creditors unless the PR participates after notice to creditors.
• N.C. Gen. Stat. § 28A-19-3 (Time limits on presenting claims) – Most claims are barred if not presented within 90 days of published notice.

Analysis

Apply the Rule to the Facts: If DHHS denies the waiver, its claim remains payable from estate assets. Because the home is the only asset, a PR would need to create liquidity. That typically means petitioning the Clerk to authorize a refinance (mortgage) or a sale. Having siblings deed their interests to you does not remove creditor rights; within two years of death, any heir transfer or mortgage must involve a PR who has given notice to creditors and joins the transaction, or the transfer is ineffective against Medicaid.

Process & Timing

1. Who files: The prospective personal representative. Where: Clerk of Superior Court in the decedent’s county of domicile (open the estate); any special proceeding to mortgage/sell may be filed where the real property is located. What: Apply for Letters (AOC‑E‑201 or AOC‑E‑202), then publish and mail notice to creditors (including DHHS); if hardship is denied and cash is needed, file a petition for authority to mortgage (or sell) the real property. When: Publish notice promptly; creditors generally have 90 days from first publication to present claims.
2. After Letters issue and notices go out, the PR files a special proceeding asking the Clerk to authorize a mortgage under the statute. The Clerk may approve terms if the mortgage is in the estate’s best interest. County practices and lender timelines vary; expect several weeks to a few months.
3. Close: Use loan proceeds to pay approved claims in statutory order, obtain a satisfaction or release from DHHS, then file the final account for approval and close the estate.

Exceptions & Pitfalls

• Heir-to-heir deeds or heir refinances within two years of death can be void as to creditors unless a PR has published notice and joins the transaction.
• Trying to avoid probate when the only asset is the home and there is a Medicaid claim often fails; DHHS can ask the court to appoint a public administrator to liquidate the home if necessary.
• Small-estate affidavits do not authorize the sale or mortgage of real estate; if the home is needed to pay claims, appoint a PR.
• If the hardship denial is appealable, act quickly—agency appeal deadlines can be short. An appeal does not extend statutory claim or notice deadlines in the estate.
• Lenders usually require Letters and a court order authorizing the mortgage; start with opening the estate and giving notice to creditors to avoid delays.

Talk to a Probate Attorney

If you’re dealing with a denied Medicaid hardship waiver and need to use the home to pay the claim, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.