Medicaid Estate Recovery in North Carolina: Step-by-Step Guide for Heirs

Detailed Answer

When a North Carolina resident received Medicaid benefits after age 55, the State must try to recoup those costs from the person’s probate estate after death. This process is called Medicaid Estate Recovery and is carried out by the Division of Health Benefits (DHB). Below is a plain-English breakdown of how a claim moves from the date of death to resolution when heirs inherit real property.

1. Death and Opening the Estate

• Death certificate issued. The personal representative (PR) or next of kin obtains it.
• Estate opened with the Clerk of Superior Court. The clerk appoints an executor (named in a will) or administrator (when no will). See N.C. Gen. Stat. Chapter 28A.

2. Mandatory Notice to DHB (Within 90 Days)

• Under N.C.G.S. §108A-70.5(c), the PR must send certified mail to DHB:
• Decedent’s name, SSN, date of birth, date of death
• Estate file number and county
• Copy of the death certificate
• DHB then has 90 days after receipt to respond with a claim amount or say it has no claim.

3. DHB Files Its Creditor Claim

• The claim is filed with the Clerk like any other creditor claim—generally within 90 days of publishing “Notice to Creditors.” See §28A-19-3.
• If approved, the claim has the same priority as other Class B claims (funeral and administrative costs come first).

4. Lien or “Notice of Medicaid Estate Claim” on Real Property

• When the estate owns real estate, DHB may record a Notice of Medicaid Estate Claim in the county land records to preserve its interest. See §108A-70.5(b1).
• Heirs still inherit, but the property carries the lien until the claim is paid or waived.

5. Possible Deferrals or Waivers

• Automatic deferral while a surviving spouse, minor child, or blind/disabled child is alive. DHB cannot collect during that period. §108A-70.5(a).
• Hardship waiver may apply. Common reasons: inherited home is modest, heir provides care, or estate recovery would force sale of a working family farm. The heir submits DHB’s hardship form within 30 days of notice.

6. Satisfying or Settling the Claim

• The PR may—
• Use estate funds to pay DHB in full;
• Sell the property (through normal probate sale or partition) and pay DHB from proceeds; or
• Negotiate a discounted lump-sum payoff if allowable.
• Once paid, DHB records a Release, clearing title.

7. Closing the Estate

• The PR files a Final Account showing the claim was resolved.
• The Clerk discharges the PR and the estate closes.

Hypothetical Example

John died in Wake County owning a $200,000 house and $10,000 in the bank. He received $65,000 in Medicaid benefits after age 55. His daughter Mary opens the estate, mails notice to DHB, and publishes Notice to Creditors. DHB files a $65,000 claim. Mary lists the house for sale, nets $190,000 after costs, pays DHB in full, distributes the balance to heirs, and closes the estate. Title to the house is now clear for the buyer.

Helpful Hints

• Send DHB notice by certified mail—keep the green card as proof.
• Do not transfer real property until the Medicaid claim is resolved; buyers will insist on a release.
• Small estates using §28A-25-1 “Collection by Affidavit” must still notify DHB.
• Heirs can apply for a hardship waiver—deadlines are short, so act quickly.
• A Medicaid lien does not attach to life insurance paid directly to beneficiaries.

In short: North Carolina probate law gives DHB several tools to recover Medicaid costs from an estate, but proactive notice, timely creditor management, and possible waivers can protect family property. Need help navigating the claim? Our firm’s seasoned North Carolina probate attorneys are ready to guide you. Call (919) 341-7055 today for a confidential consultation.