Whose Debt Takes Priority if an Estate Is Insolvent and NJ Medicaid Gets Involved

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Administration Attorney

If an estate has debts whose total amount $$$ exceeds the value of Estate assets, cash, etc, the estate is known as insolvent. Insolvent Estates create competing demands upon Executors and Administrators. Who gets paid first, especially if there is a New Jersey Medicaid lien filed against the Estate?

By statute, Medicaid has priority against certain liens/claims filed against an insolvent estate, but certain other claims are superior such as funeral and administration expenses. Where a lien against a particular asset is deemed a priority lien (like a mortgage or municipal real estate tax lien) these liens are superior to a Medicaid claim.

In a published case the administrator of the estate tried to get the parties to compromise a tax lien. The tax sale certificate holder refused so counsel filed for a judgement of insolvency and requested instructions on the distribution. See the case of “Matter of Edith Pryor” 366 N.J. Super. 545 (App. Div. 2004). The court ruled that tax liens along with Estate Administration expenses take priority over Medicaid and other creditors.

To discuss your NJ Estate Administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.