There are two kinds of liens. TEFRA (Tax Equity and Fiscal Responsibility Act) liens or pre-death liens occur when the recipient is permanently institutionalized. Post-death liens are placed against the estate of a deceased Medicaid recipient.
TEFRA liens give the states the option to use a lien to prevent the recipient from giving away assets before they can be assigned to offset long-term care costs accrued on their behalf. Under TEFRA, Medicaid’s interest is given precedence over the interests of adult children or others who claim an interest in the home. While TEFRA liens are placed before death of the recipient, recovery does not generally begin until the recipient dies unless the property is sold during the recipient’s lifetime. States must dissolve the lien if the recipient is able to return home. If the property is sold voluntarily, Medicaid’s claim must be settled first over mortgage lien holders or others who may have claim. Medicaid can only claim the lesser of either the amount actually spent on the individual’s behalf or the individual’s equity interest based on the home’s fair market value.