Appellate Division Finds that Division of Developmental Disabilities Trumps Medicaid Lien During Lifetime of Assistance Recipient
In re G.W., Docket No. A-3597-23 (N.J. Super. App. Div. June 17, 2025)
Gabrielle (“G.W.”) had resided in a group home operated by Arc of Bergen and Passaic Counties (“Arc”) since 2012. The Division of Developmental Disabilities (“DDD”) and New Jersey’s Medicaid program implemented through the Division of Medical Assistance and Health Services (“DMAHS”) had jointly provided for her services and treatment.
In December 2019, G.W. inherited $600,000 from her sister after she died intestate. In September 2020, G.W. was declared an incapacitated person and the Bureau of Guardianship Services was granted full guardianship of her person.
In January 2024, Arc filed a complaint requesting to be appointed G.W.’s legal guardian and seeking to transfer the funds to a pooled special needs trust, so G.W. could continue to be eligible for Medicaid. DDD responded by claiming a lien on the funds for the cost of G.W’s care, which it argued had to be satisfied before Arc established the trust. Arc argued that under the Medicaid lien statute, DMAHS’s future Medicaid lien was a preferred claim that took priority over the DDD lien. Importantly, G.W.’s guardian ad litem informed the trial court that she believed Arc’s position was in G.W.’s best interest.
In June 2024, the trial court held that the DDD lien would not be recognized because it was subordinate to the Medicaid lien and directed G.W.’s funds to be transferred to Arc’s pooled trust. It found that under the Medicaid Lien Statute, there can be no Medicaid lien against a living person. It also found under the DDD lien statute that DDD’s lien was an immediate interest, contrasting with DMAHS’s future interest in the Medicaid lien. However, the trial court performed a best-interest analysis and ultimately agreed with Arc’s argument that the Medicaid lien should take priority. It found that it would be in G.W.’s best interest to adopt a reading of the statutes that did not recognize the DDD lien, so that her Medicaid eligibility would not be in jeopardy. DDD appealed the trial court’s ruling, arguing that it was entitled to recover on its lien because the Medicaid lien could not attach before G.W.’s death.
The Appellate Division interpreted the statutes by analyzing their plain language. The Medicaid lien statute states that a lien can be recovered “from the estate of a deceased recipient.” N.J.S.A § 30:4D-7.2(a)(1). The DDD lien statute mandates that a lien shall attach against the property of a person receiving services for the total cost of their care. N.J.S.A. § 30:4-80.1. Therefore, since G.W. was alive at the time of the dispute, the Medicaid lien did not exist and could not have attached to the funds. Only when both the DDD and Medicaid liens exist at the same time does the Medicaid lien take priority.
The Appellate Division further stated that the trial court’s best-interest analysis was not appropriate because of the legislative mandate in the DDD lien statute’s applicable code, directing the individual to repay the cost of their care if they possess the resources to do so. N.J.A.C. 10:46D-2.1(f).
The Appellate Division held that DDD may recover on its lien, as the only statutorily recognized lien in existence. It reversed the trial court’s ruling directing G.W’s funds to Arc’s trust and remanded for further proceedings. Although G.W. died on May 30, 2025, shortly before the Appellate Division’s decision, the court only addressed the trial court’s previous ruling and directed any new circumstances to be brought before the trial court on remand.