Lien Against Medicaid Recipient's Property Doesn't Attach Until It Is Recorded

South Dakota's highest court rules that a lien against property owned by a Medicaid recipient does not attach to the property until it is recorded, meaning that in this case property passes to the recipient’s children free of the state’s lien. Hollman v. South Dakota Dept. of Social Services (S.D., No. 2015 S.D. 21, April 15, 2015).

Darlene Hollman inherited a one-fifth interest in real estate, subject to a life estate in her mother. Ms. Hollman began receiving Medicaid in 2005, and died intestate in 2008 while her mother was still alive. Ms. Hollman's children and the state were not aware of the interest in the property, so her estate was not probated until her mother died in 2012. When the estate was opened to pass the interest in the property to her children, the state filed a claim against the estate for recovery of nursing home benefits. The estate denied the claim, citing the three-year statute of limitations.

Rather than appeal the denial of the claim, the state recorded a lien on the property and filed a declaratory judgment action. South Dakota Medicaid law provides that any payment of Medicaid is a debt that creates a lien against any property the recipient has an ownership interest in. State law also provides that once the lien is recorded, it attaches to the property. The trial court ruled that an enforceable lien on the property was created at the time Medicaid was provided and granted summary judgment to the state. The estate appealed.

The South Dakota Supreme Court reverses, holding that a Medicaid lien does not attach to an interest in real property until it is recorded, and that at the time the state recorded its deed, the interest had passed to Ms. Hollman's children. According to the court, "because the lien had not been recorded at the time of her death, she had no interest upon which the lien could attach. Therefore, [Ms.] Hollman’s interest passed to her children free of [the state's] lien."

For the full text of this decision, go to: https://ujs.sd.gov/uploads/sc/opinions/27183.pdf

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