Short Answer

In North Carolina, Medicare and Medicaid usually must be repaid from a wrongful death settlement before any money goes to heirs. Do not take your share in cash if you receive means-tested benefits. Instead, resolve Medicare/Medicaid claims first and direct your share into a proper vehicle (such as a first-party special needs trust or an ABLE account) so a lump sum does not disrupt eligibility. Court approval of the settlement and attorney’s fee is typically required before disbursement.

Understanding the Problem

In North Carolina wrongful death cases, can an heir who receives Medicaid or Medicare protect those benefits when money is paid? Here, two siblings will split the net settlement after liens and the contingency fee are paid, and one sibling may need Medicaid planning before any distribution.

Apply the Law

North Carolina law requires the personal representative to compromise or settle a wrongful death claim and, in most cases, obtain judicial approval of the settlement and the attorney’s fee before funds are distributed. Wrongful death proceeds are not ordinary estate assets; after permitted expenses and required reimbursements (including Medicare and Medicaid recoveries), the remaining balance is distributed to statutory heirs. To preserve ongoing Medicaid or SSI, a beneficiary should avoid receiving funds outright and instead use a compliant vehicle, such as a first-party special needs trust or an ABLE account, with court approval where needed. The main forum is the Superior Court (often via the Clerk of Superior Court in a special proceeding or by a judge if a civil action is pending). Key timing triggers include resolving Medicare conditional payments (final demand) and confirming Medicaid lien amounts before distribution.

Key Requirements

• Settlement approval: Unless all adult beneficiaries consent in writing and are competent, a judge must approve the compromise and the attorney’s fee before disbursement.
• Proceeds and payouts: Wrongful death proceeds are used first for permitted expenses (burial; limited last-illness medical), then to reimburse Medicare and satisfy any valid Medicaid recovery, before distribution to heirs.
• Medicare conditional payments: Report the claim, obtain the conditional payment amount, and pay the final demand from the settlement; Medicare’s recovery is not limited by state medical-expense caps.
• Medicaid lien/subrogation: North Carolina Medicaid may assert a lien; the amount must be verified and resolved from the recovery before distribution, subject to applicable allocation rules.
• Preserve benefits: If an heir receives needs-based benefits, have the court approve funding of a first-party special needs trust or direct-pay an ABLE account so the lump sum does not count as a resource.
• Attorney’s fee documentation: Submit the signed contingency agreement and request written court approval; provide fee confirmation to the client.

What the Statutes Say

• N.C. Gen. Stat. § 28A-13-3 (PR powers; settlement approval) – PR may compromise wrongful death claims; judicial approval required unless all competent beneficiaries consent in writing.
• N.C. Gen. Stat. § 28A-18-2 (Wrongful death; damages; distribution) – Proceeds are not ordinary estate assets; limited payment of last-illness medical/burial; balance to heirs.
• N.C. Gen. Stat. § 108A-57 (Medicaid subrogation/liens) – State Medicaid may recover from third-party liability settlements; resolve lien from proceeds before distribution.

Analysis

Apply the Rule to the Facts: Because liens must be resolved before money goes to heirs, the PR should secure Medicare’s final demand and the Medicaid lien amount, pay them from the settlement, and then distribute the balance. Given the client’s possible need for Medicaid planning, the court should approve funding of a first-party special needs trust or ABLE account for the client’s share so the distribution does not count as a resource and jeopardize benefits. The attorney’s contingency fee should be submitted for written approval and confirmation.

Process & Timing

1. Who files: Personal representative. Where: Superior Court (often via the Clerk of Superior Court in a special proceeding, or by a judge if a civil action is pending). What: Petition/motion to approve wrongful death settlement, proposed release, signed contingency fee agreement, lien summaries (Medicare/Medicaid/EMS/providers), and a proposed distribution plan (including any special needs trust or ABLE funding). When: Before the insurer disburses funds or the release is finalized.
2. Resolve liens and claims: Report settlement to Medicare, obtain the conditional payment letter and then the Final Demand; contact NC Medicaid’s third-party recovery unit to confirm lien amount and any allowed allocation; address EMS/provider liens as required. Expect several weeks for agency responses; timeframes can vary by county and agency.
3. Protect eligibility and distribute: Establish and, if needed, seek court approval of a first-party special needs trust or direct funds to an ABLE account for the Medicaid/SSI-recipient heir. After court approval, the PR pays approved fees and liens, then distributes to heirs and files the required accounting of wrongful death proceeds.

Exceptions & Pitfalls

• Paying heirs before Medicare’s Final Demand or Medicaid’s lien is confirmed can cause repayment problems and delay closing the case.
• Letting an SSI/Medicaid recipient deposit funds into a personal account can immediately disrupt eligibility; fund a compliant trust or ABLE account first.
• Failing to obtain required court approval of the settlement and fees can hold up payment or require rework.
• Overpaying last-illness medical bills beyond statutory limits or ignoring agency recovery rights can result in objections or surcharge.

Talk to a Wrongful Death Attorney

If you’re dealing with a wrongful death settlement and need to protect Medicaid or Medicare benefits, 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.