The decedent, Tracy Solivan, had been disabled at birth as a result of medical malpractice at a Hudson County hospital. Her parents had obtained a $172,400 settlement on her behalf, which was held in the Hudson County Surrogate’s account until she turned eighteen. In 2002, after she turned 18, Tracy Solivan’s mother was appointed as her guardian (later a co-guardian was also appointed) and the funds were transferred from the Surrogate’s account to the co-guardians, who transferred the funds to an investment account.

Tracy Solivan was initially placed at a Hudson County facility, the costs of which were borne by Hudson County pursuant to the malpractice settlement agreement. In 1984, she was transferred to a different facility. From that point, her services were subsidized by the Division of Developmental Disabilities (“DDD”). In 2002 until she died, Ms. Solivan also received Medicaid benefits through the Division of Medical Assistance and Health Services (“DMAHS”). She died intestate in 2012, with an estate in excess of $600,000.

DDD filed a statutory lien against the Estate for more than $3 million for reimbursement of its subsidy, asserting that Tracy Solivan had not been qualified to receive that subsidy. DMAHS also filed a claim for more than $2 million, claiming that she had received incorrectly paid Medicaid benefits. They claimed that Tracy Solivan was ineligible for these public benefits because, once the settlement funds were released by the Surrogate in 2002, her excess resources rendered her financially ineligible for the benefits.

The Estate moved to discharge the claims. The Chancery Division judge denied that motion, as well as the Estate’s motion for reconsideration. On appeal, the chancery judge’s decision was affirmed.

The appellate court found that, once the settlement funds were released by the Surrogate to the co-guardians, they became “available” to Tracy Solivan. Because those funds exceeded the $2,000 Medicaid resource limit, she was ineligible for benefits as of that date. The court rejected the Estate’s claim that N.J.S.A. 3B:12-36 limits a guardian’s authority over the ward’s funds. Instead, the court concluded that, unless restrictions are placed on the guardianship certificates pursuant to N.J.S.A. 3B:12-37, the guardians have discretion to use the ward’s funds for the ward’s health, education, support and comfort. Therefore, once the guardians took control of the funds in 2002, those funds were “available.” The court also rejected the Estate’s argument that the DMAHS claim violated the anti-lien statute, 42 U.S.C. 1396p(a)(1), because that statute does not preclude a lien for incorrectly paid benefits.

The DMAHS claim had priority over DDD’s lien claim, pursuant to N.J.S.A. 30:4D-7.2(d). Therefore, the court found that there was no need to review the DDD’s claim, since the Estate assets were insufficient to meet both claims. However, the court noted that the 2002 release of funds to the guardians provided Tracy Solivan with the ability to pay for the costs of the DDD services, and triggered the DDD’s statutory right of recoupment pursuant to N.J.A.C. 10:46D-2.1(f).

A copy of In re Estate of Solivan can be found here – Matter of the Estate of Tracy Solivan

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