Hill signed a two-year, $18-million contract last season, with the second year at the team's discretion.
The team will still hold his rights, although as a free agent, he'll take up $13.5 million of the team's spending power with his cap hold.
The Lakers will need to renounce Hill to remove his salary completely from their books.
The Lakers also can look to re-sign Hill, if they strike out with their top choices in free agency.
Through 70 games with the team last season, Hill averaged 10.0 points and 7.9 rebounds a game
The Lakers have yet to announce their decision on Hill.