Estate Recovery and the Family Home in Washington

Can Washington take the family home after a Medicaid long-term care recipient dies? It can, in some situations. Washington can seek repayment from the estate of someone who received Medicaid long-term care, and a home they owned can be part of it. Recovery must wait while a surviving spouse is alive.

If a parent or spouse is on Medicaid long-term care, the first question is usually whether the state can take the house. The answer depends on whether the state is using a lien while the person is alive or a claim after death, and who is still living in the home. Those are two separate tools, and each changes a sale in its own way.

A note before you read on. This article is general information, not legal, tax, or financial advice. I am a real estate broker, not an attorney, CPA, or lender, and no attorney has reviewed this article. The rules below link to their sources. Where those sources do not answer a question, the article lists it under “Open questions” near the end, so you can take it to a lawyer, the Department of Social and Health Services (DSHS) or the title company before you act.

What estate recovery is

Estate recovery is the state asking to be repaid, after death, for some of the care it paid for. Washington’s statute, RCW 43.20B.080, says that for people who were 55 or older when they received assistance, recovery comes from the estate and from nonprobate assets. For that age group the statute covers nursing facility services, home and community-based services, and related hospital and prescription drug services. WAC 182-527-2742 lists the recoverable services in full.

The federal law behind it is 42 U.S.C. 1396p(b). It requires states to seek recovery for people 55 or older, for those same kinds of services.

The Washington rules sit in chapter 182-527 WAC. The rule text is the place to check a specific service. The DSHS Office of Financial Recovery (OFR) says on its page that recovery also applies to state-funded long-term care without regard to age, and to Medicaid recipients who were 55 or older.

Two limits are worth knowing:

• No assets, no recovery. According to WashingtonLawHelp, if you own nothing when you die, there is nothing to recover from.
• Medicare and private insurance are different. The same guide says services paid by Medicare or private insurance are not subject to recovery.

When the house counts as part of the estate

The rule defines the estate in WAC 182-527-2730. It is property passing under a will or by intestate succession, reduced by any valid liability against the property when the client died. For a client who died on or after September 14, 2006, the estate also includes nonprobate assets and any life estate interest the client held immediately before death.

So a house the person owned at death can be reached. How the house is titled changes the math:

How the home was held	What the rule says
Owned by the client alone	Part of the estate, reduced by valid liabilities against it
Joint tenancy	The agency may lien it, but the lien cannot exceed the client’s share, which is fair market value divided by the number of joint tenants on the date of death
Life estate	The lien cannot exceed the value of the life estate, figured from fair market value and an age-based factor

The joint tenancy and life estate details come from WAC 182-527-2746. That rule also says no lien may enforce a property right that vested before a cutoff date it names.

How Washington treats a home held as community property between spouses, or a home held in a living trust, is on the open questions list below.

Two kinds of lien: before death and after

These two tools are easy to confuse, so it helps to keep them apart.

A lien while the person is alive. Under WAC 182-527-2734, the agency may file a lien during a client’s lifetime if the client lives in a skilled nursing facility or another medical institution and the agency determines the client cannot reasonably be expected to return home. That can rest on a physician’s verification or on a stay of six months or more. It cannot be filed if a spouse or state-registered domestic partner, a child who is 20 or younger or blind or permanently disabled, or a sibling who has an equity interest and lived there for at least a year before admission lawfully lives in the home. If the client returns home, the agency releases the lien. The statute adds that the agency must give notice and a hearing first (RCW 43.20B.080, subsection 8).

WashingtonLawHelp says the state will not enforce that kind of lien, for example by foreclosing, until the owner dies.

A claim after death. Under WAC 182-527-2738, after a client dies the agency may file liens to recover the cost of recoverable services. A lien on real property the person owned just before death takes effect on the earlier of the date of death or the recording date (RCW 43.20B.080, subsection 6). Separately, OFR says it may file a lien, a creditor’s claim in probate court, or both.

When recovery waits

Recovery is not always immediate. The sources describe two kinds of delay.

Survivors who protect the estate. WAC 182-527-2738 says the agency may not recover from the client’s estate as long as there is a surviving spouse, or a surviving child who is 20 or younger or who is blind or disabled. The federal statute is similar: recovery may come only after the death of a surviving spouse, and it is barred while a child under 21, or a blind or disabled child, survives.

One wording difference to flag. The WashingtonLawHelp guide describes the family-living-in-the-home protection with “a child under age 18.” The WAC rules say age 20 or younger, which matches the federal “under age 21.” Only the WashingtonLawHelp wording differs, so rely on the rule text and confirm with DSHS.

Undue hardship. WAC 182-527-2750 lets an heir ask the agency to delay recovery. The rule says hardship exists only in three situations:

1. The property is the heir’s sole income-producing asset.
2. Recovery would deprive the heir of shelter they cannot afford to replace.
3. The client is survived by a state-registered domestic partner.

It also says hardship does not exist if the client or the heir created circumstances to avoid estate recovery. If a delay is granted, the heir has conditions to meet, including living on the property, not selling, transferring or encumbering it, paying property taxes and utilities on time, and insuring it. If the heir breaks a condition, the agency may begin recovery. A denial comes in writing with instructions for requesting a hearing.

A delay is not the same as a cancellation. The rule describes the delay as lasting until the hardship ends, and what happens to the amount owed in the meantime, including whether interest keeps running, is on the open questions list.

What changes about a sale when there is a lien

Here is the part I can speak to as a broker, and I will separate what the sources say from what I am describing from practice.

What the sources say.

• A transfer or the passage of time starts a clock. For a lien filed during life, WAC 182-527-2734 says the lien becomes a past-due debt once it is recorded and either 30 days pass after the property is transferred or nine months pass after the lien was filed. After death, WAC 182-527-2738 uses nine months from recording or from the filing of a creditor’s claim, whichever is sooner. Past-due debt accrues interest at one percent per month. The agency may waive interest if reasonable efforts to sell the property have failed.
• The state expects to be paid from the proceeds. The DSHS estate recovery brochure says that if DSHS has a lien on the home and it is sold, DSHS will recover its costs from the proceeds, and it ties the lifetime lien to people who must pay toward their cost of care. WashingtonLawHelp says an owner with a lien must pay off what is owed to the State before selling.
• Notice goes to more than the owner. Before filing a lifetime lien, the agency mails notice to the client, any authorized representative, the property address, and anyone else known to hold title. After death, notice goes to the personal representative and any known title holder, or to the known heirs if there is no personal representative.
• Timing is short. A request for an administrative hearing has to be filed with OFR within 28 days of the date on the notice, according to WAC 182-527-2753. Absent an order otherwise, the agency may file a lien 28 calendar days after mailing its notice. The same rule says disputed assets must not be distributed while in litigation.
• Some liens cannot be enforced against a later buyer. For the life estate and joint tenancy liens, the statute says the department may not enforce the lien against a bona fide purchaser or encumbrancer who acquires an interest after the recipient’s death and before the department records its lien or a request for notice (RCW 43.20B.080, subsection 7). How this applies to other liens is on the open questions list. A separate statute, RCW 43.20B.750, lets DSHS record a request for notice of transfer or encumbrance with the county. The request is not a lien and does not affect title.

What I can describe from the real estate side. In a typical sale in King County or Snohomish County, the title company searches the county records and prepares a title commitment that lists recorded liens and other items. A recorded DSHS lien would be one of the things that search turns up. That is my description of how a sale usually works, not a statement from a rule about DSHS.

Several practical questions about a sale are on the open questions list below. It is better to ask them before listing than to learn the answers mid-escrow, and that is general broker practice, not a rule. Your net from a sale depends on the price, the costs, and what is owed against the home, and the costs of selling a home page walks through each one so you know the number before the lien question comes up.

When the owner has died: probate real estate

If the person has died and the house is in the estate, the sale usually runs through the personal representative, and the notice from the state goes to that person. Probate adds its own steps and timing, which probate real estate in Washington explains from the heir and executor side. The Executor and Personal Representative Guide covers what the role involves.

Two things are worth keeping apart. The estate recovery claim can be one of the claims against the estate, since OFR says it may file a creditor’s claim in probate court. How it ranks against other claims, and what the personal representative can pay and when, is a question for the probate attorney and is on the open questions list.

How this connects to the rest of the picture

Estate recovery is only one piece of the planning around long-term care. If a spouse is the one who needs care, the guide to selling a home in Washington when a spouse needs care covers how the sale proceeds are treated, and Medicaid look-back and selling a house covers the five-year review of transfers. A shorter overview is on the page about selling a home when a spouse needs long-term care.

Open questions

The sources I read do not answer these. Each one is worth putting to OFR, a lawyer, or the title company:

• How is a payoff amount requested, how long does it take, and how does DSHS release a lien at closing?
• Can a sale close while a lien is open, and what will a particular title company require before it insures the buyer?
• How are the lien and the proceeds handled when a surviving spouse sells, or when a family member lives in the home and wants to sell?
• How is a joint owner’s share divided at closing?
• How does the home’s title (community property, living trust) change what the state can reach?
• Does interest keep running during an undue hardship delay?
• How does the state’s claim rank against other claims in probate, and does the buyer protection in RCW 43.20B.080(7) reach liens other than life estate and joint tenancy liens?

Also worth asking now: is there a lien or a request for notice recorded against the home today, and if the home is sold, who receives notice and when?

The OFR phone line listed on its page is 360-664-5700 or 1-800-562-6114. The state’s CLEAR legal help line, listed in the DSHS brochure, is 1-888-201-1014.

Frequently Asked Questions

Does Washington take the house when a Medicaid recipient dies?

Not automatically. The state can seek repayment from the estate for recoverable services, and a home the person owned can be part of that estate. Recovery must wait while a surviving spouse, or a child who is 20 or younger or blind or disabled, survives. Whether any of this applies to your family depends on facts that a lawyer or OFR needs to review.

Can the state put a lien on a home while the owner is alive?

The rule says it may, in limited cases. The owner must live in a nursing facility or other medical institution and not be reasonably expected to return home, and notice and a hearing come first. A lien cannot be filed if a spouse, a qualifying child, or a sibling with an equity interest who lived there at least a year lawfully lives in the home. If the owner returns home, the agency releases the lien.

Can we still sell the house if there is a lien?

WashingtonLawHelp says an owner with a lien must pay off what is owed to the State before selling, and the DSHS brochure says DSHS recovers its costs from the sale proceeds. The sources I read do not say how a payoff is requested, how long it takes, or what a title company requires. Those are open questions for OFR and the title company.

What if my spouse is still living in the house?

It depends on which spouse. If the spouse at home is the surviving spouse after the recipient dies, the Washington rule and federal law say estate recovery must wait while that spouse is alive. While the recipient is alive in a facility, the rule bars a lifetime lien when a spouse or state-registered domestic partner lawfully lives in the home. What happens if that spouse later sells is an open question for a lawyer.

Talk through the real estate side first

If you are weighing a sale of a family home where Medicaid long-term care or estate recovery may be part of the picture, I can help with the part that belongs to a broker: what the home would sell for, what it would net after costs, and how to line up a timeline with the title company and your lawyer. The legal questions go to a lawyer, DSHS, or the title company.

I am Emily Cressey with HomePro Associates at Keller Williams Greater Seattle. Call me at 206-245-8813, or start with my page on selling a home in probate in Washington State. More at HomeProAssociates.com.

This article is general information, not legal, tax, or financial advice. Emily Cressey is a real estate broker, not an attorney, CPA, or lender. Rules change and every situation is different, so consult a qualified professional before acting on anything here.