What types of DSHS liens are enforceable against real property?. Probate Secret Liens"and Child Support Liens . PART ONE. The Probate Secret" Lien. What is a Probate Secret lien"? . DSHS has a probate secret lien" on real property if it paid for medical assistance for an individual who was 55 years or older or any individual (regardless of age) who has received state funded long term care services. .
1. DSHS LIENS The enforceability, validity and effectiveness of DSHS liens as they relate to real property in Washington state July 11, 2007
Presented by Kelly Rickenbach, Esq.
STG Region C
2. What types of DSHS liens are enforceable against real property? Probate “Secret Liens”
Child Support Liens
3. PART ONE The Probate “Secret” Lien
4. What is a Probate “Secret lien”? DSHS has a probate “secret lien” on real property if it paid for medical assistance for an individual who was 55 years or older or any individual (regardless of age) who has received state funded long term care services.
5. Regulated under WAC 388-527-2700 Outlines the requirements, limitations and procedures that apply when DSHS recovers the costs of medical care from the estate of a deceased client when the department files liens prior to the client’s death.
6. Specifically, see RCW 43.20B.080 In the case of an individual who was fifty-five years of age or older when the individual received medical assistance, the department shall seek adjustment or recovery from the individual's estate, and from non-probate assets of the individual as defined by RCW 11.02.005, but only for medical assistance. Recovery from the individual's estate, including foreclosure of liens imposed under this section, shall be undertaken as soon as practicable, consistent with 42 U.S.C. Sec. 1396p.
7. For Long Term Care - See RCW 74.39A.170 Allows for recovery of long-term care costs that are paid with state-only funds from the estate of individuals of all ages.
The specific language reads as follows:
All payments made in state-funded long-term care shall be recoverable as if they were medical assistance payments subject to recovery under 42 U.S.C. Sec. 1396p and chapter 43.20B RCW, but without regard to the recipient's age.
8. What types of expenses are recoverable? Medical assistance costs including those incurred at nursing facility services, home or community-based services, other services that the department determines to be appropriate, and related hospital and prescription drugs.
9. What real property is affected? DSHS has a right to all real property (land or buildings) and all other property (mobile homes, etc.) the individual owned or had an interest in when he/she died. Estate may also include certain other property interests an individual had immediately before death. This includes joint interest of life estate in a house or land.
10. Are there any exceptions? A home transferred to spouse or minor prior to client’s death is not considered part of the estate for purposes of DSHS liens.
Assets that have been properly transferred prior to a person’s application for Medicaid are not subject to estate recovery. Limitations to asset transfers are found in state and federal law and are sometimes subject to scrutiny of the Medicaid/DSHS employees.
11. When is the process started? DSHS does not file its lien or try to recover against any real property until the death of the recipient of the medical care of services.
And even then…DSHS may still defer collection under limited circumstances.
12. Deferred Recovery The department defers recovery from the estate:
When there is a surviving child who is under the age of 21, or blind or disabled.
Until the death of a surviving spouse (if any).
If the estate subject to adjustment or recovery is the sole income-producing asset of one or more qualified individuals and income is limited, or the department determines that recovery would cause an undue hardship for a qualified individual.
13. Who is considered a qualified individual? Qualified individual means an heir or an unmarried individual who, immediately prior to client’s death, was 18 years or older, shared the same regular and permanent residence with the client and with whom the client had an exclusive relationship of mutual support, caring and commitment.
14. IMPORTANT NOTE - Federal Law Guideline Under federal law regulations, DSHS is not allowed to impose its lien if the surviving spouse is lawfully residing on the property as their home.
15. Are there any situations when DSHS can enforce its lien or seek recovery when the person is still living?
16. YES When the individual is permanently residing in a
nursing facility or intermediate care facility,
AND the department has made a determination
(after proper notice and opportunity for hearing)
that the client won’t be discharged and return
17. But only if… None of the following still reside at the client decedent’s home:
Any children under the age of 21
Any sibling of the decedent client (who has equity interest in home and was living there at least one year prior to client’s admission into facility)
18. Does the lien relate back? YES. The “secret lien” relates back to attach to any real property that the decedent had an ownership interest in immediately before death and is effective as of that date or the date of recording, whichever is earlier.
19. What is the notice requirement? DSHS must send notification via first class mail to the address of the property and any other assets subject to the lien.
DSHS must notice the probate estate’s personal representative, if applicable, and any other person known to have title to the affected property.
If there is no known party, then notice is sent to the last known address of the decedent or address listed on title.
20. Before filing a lien Statute allows for an option to request an administrative hearing to challenge or oppose the lien. The administrative hearing will determine the following:
- whether decedent had legal title to the property
- whether a lien is allowable under Title 42 USC Section 1396p
- and whether the department’s notice is correct as to the amounts paid on behalf of the decedent.
21. Automatic lien filed when… There is no objection, and no administrative hearing has been requested, then the department will file a lien 28 calendar days after the date DSHS mailed the notice of its intent to file a lien.
22. Bonafide purchaser protected when… The department may not enforce the lien provided by this subsection against a bona fide purchaser or encumbrancer that obtains an interest in the property after the death of the recipient and before the department records either its lien or the request for notice of transfer or encumbrance as provided by RCW 43.20B.750.
23. Title concerns What to do and what you need to consider
24. When should an exception be set up? If there is no surviving spouse
When the current vested owner’s interest derived from a deed within the past year, signed by heirs of the former owner
Death but no probate
Recent closed probate that was not solvent and DSHS had a creditor’s claim filed with no release
25. When can you eliminate the exception? If you obtain reliable evidence that the decedent was under the age of 55 at the time of death (death certificate discloses the decedent’s age so use this for verification)
An heir, personal representative or other person who had knowledge of the deceased’s care executes a lack of probate affidavit that includes following statements:
26. Lack of Probate affidavit Decedent did not receive assistance from DSHS… OR
Decedent’s surviving spouse lived on the property at the time of the decedent’s death… OR
You obtain written verification from DSHS stating that no lien will be filed.
To contact DSHS for this verification – go to the Estate Recovery Section, D.S.H.S., Office of financial recovery, P.O. Box 9501, Olympia, WA 98507. 1-800-562-6114.
27. Homestead considerations? Homestead exemption is not available against an execution or forced sale in satisfaction of a judgment obtained on debts owing to the state of Washington for recovery of medical assistance correctly paid on behalf of an individual. RCW 6.13.030 – Homestead was recently changed to $125,000.00RCW 6.13.030 – Homestead was recently changed to $125,000.00
28. Company Policy It is company policy NOT to ignore judgment or liens against homestead property.
29. If you are unsure…
CALL YOUR LOCAL UNDERWRITER!!!
30. PART TWO CHILD SUPPORT LIENS
31. Child Support Liens Brief Background
The state of Washington in exercising its police and sovereign power, declares that the common law and statutory remedies pertaining to family desertion and nonsupport of minor dependent children shall be augmented by additional remedies directed to the real and personal property resources of the responsible parents. In order to render resources more immediately available to meet the needs of minor children, it is the legislative intent that the remedies herein provided are in addition to, and not in lieu of, existing law.
Common law and statutory procedures governing the remedies for enforcement of support for financially dependent minor children by responsible parents have not proven sufficiently effective or efficient to cope with the increasing incidence of financial dependency. The increasing workload of courts, prosecuting attorneys, and the attorney general has made such remedies uncertain, slow and inadequate, thereby resulting in a growing burden on the financial resources of the state, which is constrained to provide public assistance grants for basic maintenance requirements when parents fail to meet their primary obligations.Common law and statutory procedures governing the remedies for enforcement of support for financially dependent minor children by responsible parents have not proven sufficiently effective or efficient to cope with the increasing incidence of financial dependency. The increasing workload of courts, prosecuting attorneys, and the attorney general has made such remedies uncertain, slow and inadequate, thereby resulting in a growing burden on the financial resources of the state, which is constrained to provide public assistance grants for basic maintenance requirements when parents fail to meet their primary obligations.
32. Public Policy Arguments It is the public policy of the state of Washington that children shall be maintained from the resources of responsible parents, thereby relieving, at least in part, the burden presently upon the general citizens through welfare programs.
33. When can a lien for child support be filed? Any time a parent is delinquent and owes back child support as ordered through a court proceeding such as a divorce decree, separation agreement or paternity suit, DSHS can file a lien on all real and personal property.
34. See specifically RCW 74.20A.060 LIENS CAN BE ASSERTED WHEN…
(a) When support payment is past due, if the parent's support order contains notice that liens may be enforced against real and personal property, or notice that action may be taken under this chapter;
(b) 21 days after service of notice of support debt
(c) 21 days after service of notice and finding of financial responsibility
(d) 21 days after service of a notice and finding of parental responsibility;
(e) 21 days after service of a notice of support owed; or(f) When appropriate under RCW 74.20A.270.
35. Division of Child Support & DSHS The division of child support may use uniform interstate lien forms adopted by the United States department of health and human services to assert liens on a responsible parent's real and personal property located in another state.
36. WATCH OUT FOR OTHER STATE LIENS! Those liens that are filed by other states, provided that they comply with the procedural rules for the filing of liens under the State of Washington regulations set forth in RCW 65.04 are enforceable without notice or hearing.
37. What is the practical effect? A DSHS child support judgment or lien will impede the sale and needs to be paid in full or otherwise discharged prior to transferring title.
Do not rely on an individual’s statement that the lien has been satisfied or that the payments are current. Although support officers will sometimes work with individuals to allow for partial release to that a purchase can be completed, this is the exception, not the rule.
38. Priority? The claim of the department for a support debt, not paid when due, shall be a lien against all property of the debtor with priority of a secured creditor. The lien shall attach to all real and personal property of the debtor on the date of filing of such statement with the county auditor of the county in which such property is located.
39. What if you are handling a transaction when the person is selling property? The statute is very clear that whenever a support lien has been filed and there is in the possession of any person, firm, corporation, association, political subdivision or department of the state having notice of said lien any property which may be subject to the support lien, such property shall not be paid over, released, sold, transferred, encumbered or conveyed, except as provided for by the exemptions contained in RCW 74.20A.090 and 74.20A.130.
40. Exceptions??? As set forth in detail in RCW 74.20A.090 & 030, you may encumber, sell, convey or transfer when:
(a) A written release or waiver signed by the department secretary has been delivered to said person, firm, corporation, association, political subdivision or department of the state; or(b) A determination has been made in an adjudicative proceeding pursuant to RCW 74.20A.055 or by a superior court ordering release of said support lien on the basis that no debt exists or that the debt has been satisfied.
41. Working with the department is key… Department will sometimes work with title company to release lien upon payment of the debt. If receiving less than the amount of the debt from the sale, the support enforcement officer may negotiate a partial release based upon a reasonable payment agreement.
42. How does DSHS enforce its child support lien? Filing an action for Foreclosure.
Whenever a support lien has been filed, an action in foreclosure of lien upon real or personal property may be brought in the superior court of the county where real or personal property is or was located and the lien was filed and judgment shall be rendered in favor of the department for the amount due, with costs, and the court shall allow, as part of the costs, the moneys paid for making and filing the claim of lien, and a reasonable attorney's fee, and the court shall order any property upon which any lien provided for by this chapter is established, to be sold by the sheriff of the proper county to satisfy the lien and costs. The payment of the lien debt, costs and reasonable attorney fees, at any time before sale, shall satisfy the judgment of foreclosure.
43. What if there aren’t sufficient funds from the sale? Where the net proceeds of sale upon application to the debt claimed do not satisfy the debt in full, the department shall have judgment over for any deficiency remaining unsatisfied and further levy and sales upon other property of the judgment debtor may be made under the same execution. In all sales contemplated under this section, advertising of notice shall only be necessary for two weeks in a newspaper published in the county where said property is located, and if there be no newspaper therein, then in the most convenient newspaper having a circulation in such county.
44. Homestead considerations? There are certain claims to which the Homestead exemption does not apply – and this is another one! The homestead exemption is not available as against an execution or forced sale in satisfaction of a judgment obtained for child support payments.
45. Discharge through bankruptcy? Discharge in bankruptcy does not discharge the obligation of a child support payment. See specifically Section 523(a)(5)Bankruptcy Code.
46. How does your office handle the title search? Many of the local agents I spoke with are running a search back 20 years. This is important because child support judgments can last up to 20 years…and do not automatically expire when the child turns 18. In fact, the statute provides that a judgment for child support can be valid up to 10 years after the 18th birthday.
47. PART THREE INTERESTING NOTES & TITLE CLAIMS & ISSUES
48. Recent Claim DSHS lien (for child support) was not shown on the title policy issued to the lender. Borrower was delinquent and the loan went into foreclosure. When foreclosure action was initiated, the lender was contacted by DSHS who indicated it had priority over the insured loan and made a claim for full payment of the lien.
49. What happened? Lender paid DSHS and we reimbursed the lender for the amount of “actual loss” sustained.
Little negotiation available when DSHS has a valid lien against an individual owning real property.
50. National Trends Title industry helps secure $80M in child support! Title companies have secured more than $330 million in delinquent child support payments since July 2002.
The Title Report, December 2006.
51. How common are these issues? The California Department of Child Support Services recently indicated that companies, which serve as the primary source for the collection of child support liens in the state, recovered more than $80 million in delinquent payments during the 2005-2006 Fiscal Year. A recent national study showed that title companies undertake corrective action in more than one out of every three real estate transactions.
52. "Title companies play an important role in the collection of child support which often goes unrecognized by regulators and consumers," said California Land and Title Association executive vice president Lawrence Green. "Not only do title insurers undertake an exhaustive search of public records to protect property owners, they coordinate with government agencies to identify and recover delinquent child support, spousal support and tax payments that would otherwise have gone uncollected."