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A Will Protects Your Family and Heirs.

What happens when someone dies without a Will in New Jersey? Unless the individual signs a Will, he or she will have an intestate estate. That is, the individual’s future estate will not be governed by a Will. For the reasons discussed below, an intestacy (or an estate estate) often means confusion and problems.

A Will can actually save you money.

“When I pass away, I want my heirs to fight with each other and the tax authorities about my estate.” Said no one caring, ever. An intestate estate can be fraught with hidden risks. Here’s why that is, and what you can do to avoid leaving your heirs with a mess.

Compared to New York and the nearby City Philadelphia, New Jersey has “probate friendly” rules of court and readily accessible resources. Throughout New Jersey and especially in Burlington, Camden and Gloucester counties, the Surrogate’s Courts are well-run government offices. The Surrogates’ Courts are typically staffed by very helpful and knowledgeable employees. They can explain probate procedures. Their websites may contain helpful information and forms. A great example of this is my home county of Burlington’s website: https://co.burlington.nj.us/541/Forms-Documents. “

Intestate Estates are not “probate friendly.”

One would expect an intestate estate administration here in Marlton, New Jersey to be easy. However, the administration of a intestate estate is just as likely to be “probate friendly” as a “friendly divorce” is pleasant. You (or your parent or spouse) should not take intestate succession for $1.

A carefully designed estate plan brings peace of mind and can pay for itself.

Without a Will, there can be uncertainty and discord among relatives. If your adult children, Johnny and Jimmy, can’t get along at holiday dinners, how will they ever agree on how your estate is divided or who gets the family heirlooms? Even if there is family harmony, without a Will, your estate can be at risk, especially if there are minor children or creditors with large debt. For instance, if you pass away leaving a home subject to a mortgage, and your adult heirs do not apply to administer your estate, your mortgage company can. The mortgagor will have an interest in selling the home as quickly as possible to pay off the mortgage, while the heirs living in the home will want to remain in the home. Such a situation can occur if you have an extended illness, and miss several mortgage payments. Why would you want your heirs to face such a situation? To ensure stability for your heirs, it is better to appoint in your Will someone you can rely on to administer your estate.

Having a Will Frees Your Heirs from A Bond Requirement.

Another reason not to take intestate succession for $1 is that your personal representative will be stuck with the probate bonding requirement. Whoever is appointed in an intestate estate, (except for a spouse in a small estate), will probably have to post a bond. While there are some exceptions, such as for a spouse in a small estate, the exceptions are limited. A bond is like insurance. Like insurance, a probate bond has a premium. Without access to the decedent’s finances, the individual applying for appointment will have to pay the bond premium from his or her own personal funds and seek reimbursement from the estate later on. If the individual seeking appointment had a criminal conviction (even in the distant past), or poor credit, getting bonded can be a problem.

It may be possible to obtain a court order waiving the bond requirement, however, as with any court proceeding, there will be additional costs. Such costs can include probate and court filing fees, attorney’s fees, and mailing costs. If a court order is sought to waive the bond requirement in an intestate estate, delays will also result due to the period of notice that must be given to all other interested parties, which can include creditors, the other Will beneficiaries, and in the case of a charitable request, the New Jersey Attorney General’s office. With a valid Will in place, you can save time, money and agita, for your heirs. It is far more cost-efficient and quicker to avoid these hassles by having your Will prepared properly with a responsible personal designated as the Executor of your estate and a provision in your Will waiving the bond requirement.

Without a will, or with an inartfully drafted Will prepared by a layperson, there can be uncertainty and even litigation, over who will plan the funeral and how the decedent’s debts, expenses, and taxes (such as Inheritance taxes) will be paid and how money will be invested for a minor child. Without a Will establishing a minor’s trust, property left to a minor is required to be deposited with the Surrogate’s Court, in the Surrogate’s Intermingled Trust Fund (SIFT). In case you are not familiary with the SITF, here is some background information. Guardianship of Minors | Gloucester County, NJ (gloucestercountynj.gov).

A Will Can Protect Minor and Disabled Beneficiaries.

Funds left to minors through intestate estates or through beneficiary designations are invested at bank rate in the Surrogate’s Intermingled Trust Fund (SITF). Neither the minor nor the minor’s parents have any ability to select more productive investments. The funds will generally not be released without a court order until the minor claims the funds upon attaining the age of legal majority.  Allowing an inheritance by a minor to be held in the SITF does protect the funds for the child until child attains the age of majority. However, a testamentary trust or facility of distribution provision in your WIll can enable the funds to be invested at higher rates of return than bank rates and can facilitate distributions for the benefit of the minor for purposes such as health, education, maintenance and support, without the cost, delay and uncertainty inherent in applying for a court order.

A Will Can Help Manage Digital Assets.

A properly crafted Will and estate plan can also protect digital assets. These can include assets such as software, business and professional websites, blogs, spreadsheets, presentations, photographs, social media accounts, blockchain technology, online ledger accounts, Cryptocurrency (such as bitcoin, Ethereum, ETR, and Litecoin) and online stores. Many of these assets can be monetized and/or have quantifiable value. Without a Will with digital asset provisions, access to the decedent’s digital accounts and private keys can be denied or delayed absent appropriate documentation on behalf of the estate. This can leave the administrator in the difficult position of having to pay death taxes on assets that there is no or delayed access to, forcing the administrator to come up with another source of cash, or worse, having to deal with a death tax audit.  

A Will Can Help Prevent Probate Litigation.

When an individual or a family member drafts a Will without an attorney’s review, this can be an invitation for probate litigation. For an interesting article on what can happen when an estranged relative challenges a will, see Can estranged relatives contest your will after you die? | Legalzoom. The good news is that you can minimize the risk of probate litigation with a properly prepared estate plan prepared by a competent attorney.An experienced. knowledgeable and caring estate planning attorney can help you legally avoid, minimize or plan for death taxes, including the New Jersey Inheritance tax.

A tax savvy estate planning attorney can also help ensure that digital assets are properly planned for and that tax-efficient beneficiary designations are in place for your qualified retirement accounts. This is important to maximize income tax savings for the heirs.

These are just a few of the many reasons why estate planning is important to avoid the hidden perils of intestacy. For more information and solutions, For more information, visit the firm’s website at Fearn-Zimmer Elder Law (fearnzimmerelderlaw.com) or call to schedule an appointment at telephone number (856) 938-8578, or email Jane at fearnzimmer@gmail.com.

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Featured

Medicaid Redeterminations: Act Now!

The COVID-19 pandemic public health emergency is scheduled to expire as of May 11, 2023. https://www.cms.gov/About-CMS/Agency-Information/Emergency/EPRO/Current-Emergencies/Current-Emergencies-page. As a result, Medicaid recipients need to remain focused to protect their benefits from termination.

What are Medicaid Benefits?

Medicaid is a federally funded health care program which can pay for long-term care. https://www.medicaid.gov/medicaid/long-term-services-supports/index.html. The MLTSS Medicaid program in New Jersey provides benefits for long-term care in nursing homes and assisted living facilities, as well as in the home.

Participation in the Medicaid program is means-tested and strictly regulated. Only people with low assets and low income qualify for MLTSS Medicaid. https://www.nj.gov/humanservices/dmahs/clients/medicaid/#:~:text=To%20be%20eligible%20for%20New%20Jersey%20Medicaid%2C%20a,meet%20specific%20standards%20for%20financial%20income%20and%20resources.

In Burlington County, where my elder law office is located, and throughout New Jersey, a single individual cannot have more than $2,000 in countable assets and qualify for MLTSS Medicaid. Having even one dollar over the $2,000 countable asset limit on the first day of the month can disqualify an individual ineligibility for Medicaid for the entire month. Surprisingly, retirement account balances are included in the $2,000 countable resource limit.

Under federal law, New Jersey (and other states which have opted to receiving Medicaid funding) must follow certain requirements. One of those requirements is processing periodic Medicaid eligibility redeterminations.

What is a Medicaid Eligibility Redetermination?

A Medicaid redetermination is a review by the county Medicaid office of a Medicaid enrollee’s finances. The purpose of the redetermination is to re-confirm that despite the passage of time, the Medicaid enrollee’s resources are still below the $2,000 Medicaid eligibility threshold.

Fortunately, a Medicaid redetermination may involve only a review of one month of financial statements, unlike the Medicaid application, which takes into account sixty months of bank statements.

In a Medicaid redetermination, the Medicaid enrollee (or his or her authorized agent) completes the Medicaid eligibility redetermination form. They provide one month of bank statements for the enrollee. The agency scrutinizes the statements for changes like an inheritance, a death of a spouse, bank balances over $2,000 and large gifts during the period reviewed.

It’s a good idea to take care in completing a Medicaid redetermination, because an increase in the bank balance on the first day of the month can trigger a termination of the entire month of Medicaid eligibility. This can translate into liability for thousands of dollars of medical expenses for someone with very limited assets and income.

What Has Changed

During the public health emergency, the government recognized that there were significant disruptions in living situations, and employment. As a policy matter, health insurance coverage needed to be kept in place until the pandemic ended. New rules curtailed Medicaid terminations during the public health emergency. Now that the end of the public health emergency is drawing near, some of those protections are being lifted.

What You Need to Do

In Marlton, New Jersey and the surrounding counties where I practice elder and disability law, I have noticed that redetermination packets are being sent out to many Medicaid enrollees. https://fearnzimmerelderlaw.com/The redetermination forms must be completed and returned promptly. If you moved during the pandemic, this can be a problem, because you may not receive the forms if they are sent to an old address.

If you receive Medicaid and you have moved since January 2020, contact your county Medicaid office with your new address and email.

Check your mail for the Medicaid redetermination form. Be sure to complete and submit the form promptly, using a delivery method that allows you to confirm receipt by the county Medicaid office. It is a good idea to consult an attorney if you have questions about the Medicaid redetermination form or if you receive a termination notice.

Contact your attorney right away, in the event of a Medicaid termination notice. Medicaid terminations can jeapardize important benefits, leaving you or your spouse responsible for thousands of dollars in long term care and other medical bills, with limited funds to pay them.

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Helping Someone With Dementia Sell the Home

Selling the home through guadrianship

Sometimes, a home must be sold, but the homeowner is no longer able to sign a listing or sale agreement due to cognitive impairment, confusion, advanced dementia or severe and persistent addiction issues (i.e., Wernicke-Korsakoff syndrome), or new onset dementia after recovering from COVID-19.  covid-19-pneumonia-increases-risk-of-dementia-study-says  Others may be temporarily incapacitated due to cardiac issues, surgery, or severe illness.  These conditions can prevent an adult from being temporarily or permanently able to make important financial, medical or legal decisions.  Adults who can no longer make decisions may be incapacitated.  And in real estate bubble with many residential properties reaching their peak value, it’s critical to act fast to accept the best home sale offer.

Unfortunately, incapacitated adults are unable to enter into a binding contract, such as an agreement to list or sell the home. When this happens, one option may be to use a general durable power of attorney or a real estate power of attorney to sell the home.  But that can only be successful where there is already a valid general durable power of attorney or real estate power of attorney in place.  If there is a power of attorney, and the homeowner is able to make decisions, the home cannot be sold through a power of attorney without the homeowner’s consent to the sale.  Giving a power of attorney to a trusted adult child or friend is like giving them an extra set of keys to the car. You can always take back the keys when you wish.

More to the point, a power of attorney is an important legal document by which the principal (i.e., the person signing the power of attorney) gives authority to an agent to carry out the affairs of the principal.  The catch-22 is that in order to make a power of attorney, the principal must have legal capacity.  Unfortunately, there are many incapacitated persons who never bothered to obtain a power of attorney before they lost capacity.   Another risk is that there may be a valid power of attorney, but the agent named may be deceased, very ill, or no longer available to serve.  Once again, there is no one with legal authority to sign the home sale agreement and the house cannot be sold even if there is a buyer.

The solution is to seek a court order for authority to sell the home.  This involves filing a lawsuit in the Superior Court for a judgment of incapacitation and award of guardianship.  The guardianship process is not a simple one. There are several different types of guardianships and the correct type must be selected.  Various court rules, required information and forms must be complied with.

The guardianship process requires doctor’s reports and an investigation into the finances and health of the alleged incapacitated person. As part of the process, the Superior Court judge appoints an independent attorney to investigate these matters and to write a report.  This attorney is referred to as the court-appointed attorney.  Often, that attorney’s report carries great weight with the court.  Testimony by the doctors may be waived, or if the guardianship is disputed, there may be an adversarial hearing.  If the evidence, any testimony and the court-appointed attorney’s report indicates that the alleged incapacitated person cannot make any significant decisions as to his person or property, then a plenary guardianship may be awarded.

But this is only the first step in obtaining court-authority to sell the home of the incapacitated person, who may urgently need the anticipated net home sale proceeds to pay for long-term care.  The next step is to file a motion with the court to sell the home through the guardianship.  The court can potentially award the requested order.  Only when such an order is in place, can the home be legally sold.

Not surprisingly, this process requires additional legal work and documentation.  The guardian must show that the proposed sale is fair and reasonable and in the “best interests” of the incapacitated person. In deciding whether this standard is satisfied, the judge may consider whether the incapacitated person will ever be able to return to the home to live there independently or with the assistance of paid caregivers, provided there are sufficient funds.  The fair market value and the tax-assessed value of the home will also be considered, as will the outcome of any prior attempts to sell the property, the cost of continued homeownership, and whether the anticipated net house sale proceeds are needed to pay for long-term care. In many cases, the home must be sold as a condition of Medicaid eligibility for the former homeowner in a nursing home.

This process takes time.   In limited cases where the safety of the alleged incapacitated person is endangered, or a very good purchase offer may be lost without swift court approval, the guardianship process can be expedited in New Jersey.

The bottom line, is that when capacity is in issue, selling the home a general durable power of attorney or a real estate power of attorney is much more efficient than through a guardianship. However, selling the home through a guardianship can be done in the difficult cases where there is no legal authority in place to sell the home.

Questions, or if you need help clearing title to sell a home through a guardianship? Let Jane know.

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Avoiding a Medicaid Penalty Period

What is the Medicaid penalty period?

During the Medicaid look back period, you can’t give away your money (without receiving equal value in return) and go on Managed Long Term Services and Supports (MLTSS) Medicaid. If you do, a Medicaid penalty period will result. During the Medicaid penalty period, the Medicaid applicant is treated as if she still had the gifted funds. During this period, Medicaid will not pay for long-term care.

How long with the Medicaid penalty period be?

The sum of all the gifts made during the look back period is added. Then the total of those gifts is divided by the applicable Medicaid divisor. The result of this equation is the Medicaid penalty period.

Example. The Medicaid penalty divisor is $374.39 per day, or $11,387.69 per month. If I give away the sum of $11,387.69 during the look back period, the total gifts ($11,387.69) are divided by the Medicaid divisor of $374.39 per day. The resulting penalty is just over 30 days. A penalty period of about one month will apply on my Medicaid application, without an exemption.

Why can even a short Medicaid penalty period be a big problem? During the Medicaid penalty period, Medicaid will not pay for my long-term care. If I am already poor and living in a nursing home, how will I get the money to pay my nursing home bill? This can be a real challenge. No nursing home or assisted living facility will provide free care.

Increase in the Medicaid penalty divisor.

The higher the divisor, the shorter the penalty period will be. On May 24, 2022, the State of New Jersey increased the Medicaid penalty divisor to a rate of $374.39 per day. The new divisor applies to Medicaid applications filed on or after April 1, 2022.  Increase_in_the_Penalty_Divisor_Effective_4-1-2022.

Medicaid Penalty Traps

Unfortunately, the Medicaid penalty period can be a trap for the unwary. A penalty period can be imposed even with no gifts during the Medicaid look back period. The recent decision of H.L. v. Division of Medical Assistance and Health Services et als. shows what can go wrong. The Final Agency Decision is available online at H.L.vDMAHS&MonmouthCty

In that case, a Medicaid application was filed on behalf of H.L. with the Monmouth County Medicaid office. The Medicaid office reviewed H.L.’s bank records. H.L. withdrew about $58,000 during the Medicaid look back period. No gifts were made. The cash was spent on everyday living expenses, including rent. Some of the withdrawals were made after H.L. moved into a nursing home.

The Medicaid office computed a 162 day Medicaid penalty period. H.L. was now in a difficult situation. Unless the Medicaid penalty period was removed, H.L. would have an unpaid long-term care bill of approximately $60,000.

Reducing the Penalty with a Medicaid Fair Hearing.

The solution in H.L.’s case was to file for a Fair Hearing. On Fair Hearing, the Medicaid penalty period was reduced by the amount of the rent. The penalty period might have been avoided with better documentation of H.L.’s expenses.

How An Elder Law Attorney Can Help You.

Applying for Medicaid may appear simple, until it’s not. Doing it yourself or using a non-attorney Medicaid advisory service) can be like wading through quicksand. You may not realize you are in trouble until it is too late. Once assessed, a. Medicaid penalty can be difficult to remove. Fortunately, a seasoned elder law legal team can help obtain Medicaid coverage with as little stress as possible.

For more information on how we can help you with your New Jersey Medicaid planning and application, contact the Law Office of Jane M. Fearn-Zimmer, at telephone number (856) 938-8578 or visit the firm’s website at https://fearnzimmerelderlaw.com.

Is A Life Estate Right for You?

Jack and Jill are healthy and in their sixties. Jill’s friend’s husband has Alzheimer’s Disease and dementia. Jill’s friend spent hundreds of thousands of dollars in long-term care costs at the private pay rate, before qualifying her husband for Medicaid. Jill’s friend had a life estate, and now Jill and Jack are convinced that they need one, too.

Giving Away a Remainder Interest is Like Having Major Surgery or Getting a Tatoo.

Personally, I have nothing against medically necessary surgeries and high-quality body art. However, just because your friend has one, doesn’t mean that you need a life estate. It’s almost never that simple. To determine your best strategy, a seasoned elder law and estate planning lawyer will gather the important facts and assess the client’s objectives and wishes.

Jack and Jill have a beautiful home that they want to protect for each other and for their adult children. They might transfer their home into an irrevocable five-year Medicaid trust. That is a trust that Jack and Jill cannot undo and to which they have no ability to receive the income or the principal of the trust. If Jack or Jill should later wish to qualify for Medicaid to pay for long-term care, neither can have any ability to take the property or its income back out of the trust under any circumstances that could reasonably transpire under the terms of the Trust Agreement.

Often, homeowners don’t feel comfortable giving up control over the family home to a Trustee, who is often a financially responsible adult child. If Jack and Jill don’t want to relinquish control over the home, retaining a life estate and deeding the remainder interest in the home to their adult children may be another option for them.

What is a life estate?

A life estate is the right retained by the owner of the home to continue using and occupying the home, for the rest of the life of the owner. The owner remains responsible for the carrying costs and maintenance on the home during the life tenancy. The owner typically gives away a remainder interest. Upon the death of the life estate holder (who is referred to as the life tenant), the life estate which they held during lifetime, expires with them.

Advantages of Life Estates

Life estates can be a strategy to allow a surviving spouse in a second marriage to stay in the marital home after the death of the first spouse, and while also ensuring that the biological children of the predeceased spouse will ultimately inherit the house. A life estate may also be a way to provide a home for a dependent adult child upon the death of the parent. However, if the dependent adult child is not a financially capable person, a trust may be a better option. Depending on the circumstances, an irrevocable trust, a revocable lifetime trust, or a testamentary trust for a special needs or dependent child, with or without a life estate, may be a more appropriate solution.

Sometimes, life estates can be beneficial in Medicaid planning because they are generally not subject to a Medicaid estate recovery upon the death of the life tenant. In some cases, a parent may consider purchasing a life estate in a child’s home and residing in the child’s home for at least a year.

If the life estate is retained in the home owned by the life tenant, and the life tenant gives away a remainder interest, the life tenant can retain control over their right to stay in their home for the rest of their lives. Unlike with a 5 year Medicaid trust, the life tenants don’t have to worry about someone else (i.e., their Trustee) selling their home against their wishes. As the life tenants, if the home in which they hold the life estate is their primary residence and they are then living in the home, they can continue to receive the senior real property tax rebate (NJ Division of Taxation – Senior Freeze (Property Tax Reimbursement) | Eligibility Requirements (state.nj.us)) and if applicable, they can also continue to receive the veteran’s exemption for real property taxes on the home. New Jersey State Veteran Benefits | Military.com.

Capital Gains Income Tax Savings with Life Estates

As far as capital gains income taxes are concerned, if Jack and Jill sell the home during their lifetime and they lived in the home as their primary residence for at least two of the five years prior to the sale of the home, they can take claim the IRC 121 capital gains exemption for gains from the sale of a principal residence. If Jack and Jill are married filing jointly, this could allow them to legally exempt up to $500,000 in net home sale proceeds from long-term capital gain income taxes, which are typically taxed at either the 15% or 20% rate, with the 15% rate being most common. Topic No. 409, Capital Gains and Losses | Internal Revenue Service (irs.gov).

Problems with Life Estates

However, there is a major downside to the use of life estates in Medicaid planning. To return to Jack and Jill’s situation, if Jack and Jill hold back a life estate and their house is sold during their lifetime, they are entitled to the portion of the house sale proceeds corresponding to the value of their life estates. this means that if Jack or Jill needs care in a nursing home, their portion of the house sale proceeds is an available resource to them and must be accounted for in any Medicaid spend down. What typically happens with the sale of a home subject to a life estate during the five-year Medicaid lookback period is that the life tenant must spend down his or her or their portion of the net home sale proceeds.

Another drawback of the life estate is that if the remainder interest holder (typically, the adult children of the life tenants) have issues with poor credit, bankruptcy, divorce, substance abuse or gambling problems, then they would not be suitable remainder interest holders, due to the concern that their remainder interest could be taken into consideration in the adult child’s divorce, or liened to satisfy a judgment against the adult child.

Alternatives to Life Estates

An alternative to a life estate retained by the ill spouse is to simply transfer the deed into the name of the healthy spouse. This strategy can avoid Medicaid estate recovery (or a Medicaid lien) on the home after the sick spouse qualifies for Medicaid and subsequently passes away.

A life estate may not make sense if the home is going to be sold during the lookback period, if the home is not the primary residence of the life tenant, or if the proposed remainder interest holders have financial or addiction issues.

If the real property in question is a vacation home or a rental property, other options may include a limited liability company with an irrevocable assignment of the limited liability company interest to an irrevocable trust, or a qualified personal residence trust. The appropriate strategy will depend on the use of the property and the goals of the family in question.

In conclusion, just because your friend has one, doesn’t mean that a life estate is the best option for you. The takeaway is that there is no one-size-fits-all Medicaid plan and a life estate is not always the best solution. For a personalized assessment of your elder care planning challenges, contact Jane at Fearn-Zimmer Elder Law (fearnzimmerelderlaw.com or telephone number (856) 938-8578.

Yes, Virginia, You DO need a Will!

  • Many assume that if they pass away leaving family behind, their family will take care of their affairs and they don’t need a Last Will and Testament. Generally speaking, failing to plan means planning to fail. While every case is unique, most people DO need a will. Here are some important considerations.
  • A Will establishes who will be responsible for your affairs and/or your funeral. If you don’t have a Will, there may be confusion about who will do this and how your estate will be distributed. A Will can also you to prevent your personal representative from have to post a bond to probate your estate.
  • A parent with a minor child needs a Will to appoint a guardian for the child if the other parent is unavailable.  A Will enables the inheritance to be invested profitably. Without a Will, the funds will be deposited in the Surrogate’s Intermingled Trust Fund. The funds will be invested at bank rates until the child reaches majority, which could be years. During that period, the child’s parent or guardian cannot withdraw the funds without a court order.  
  • Business owners need a Will, to wind up the business and to protect their family.   

  • Your Will allows you to control what happens to your property after your lifetime. Unless you state otherwise through beneficiary designations and/or your trust or Will, the law of intestate succession will control who gets your estate.

Gun Ownership & Safety Tips for Seniors

Advice For Caregivers

The Pew Research Center reports that just over 40% of adults report there is a gun in their household. While the majority of gun owners are white men, the typical demographics of gun owners are changing. For example, when it comes to gun ownership for seniors, owning a firearm is becoming even more common than it was decades ago. Current estimates report that more than 17 million Americans over the age of 65 own a fiream.

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