Author: Jane Fearn-Zimmer, Esq.

Jane M. Fearn-Zimmer, Esquire is a partner at Archer Brogan, LLP. She dedicates her practice to serving clients in the areas of elder and disability law, special needs planning, asset protection, tax and estate planning and estate administration.

Is A Life Estate Right for You?

On By Jane Fearn-Zimmer, Esq.In UncategorizedLeave a comment

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.

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A Will Protects Your Family and Heirs.

On By Jane Fearn-Zimmer, Esq.In Dementia, Estate PlanningLeave a comment

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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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.

On By Jane Fearn-Zimmer, Esq.In Medicaid, UncategorizedLeave a comment

Yes, Virginia, You DO need a Will!

On By Jane Fearn-Zimmer, Esq.In Estate Planning, UncategorizedLeave a comment
  • 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.

Estate Planning for Gen Z’s and College Students

On By Jane Fearn-Zimmer, Esq.In Estate Planning, UncategorizedLeave a comment
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Going away to school is exciting.

But before taking Junior to college or to his first apartment, don’t forget legal matters. There are key financial and legal documents you need in place. These documents are a general durable power of attorney, health care proxy and living will for Junior. Once Junior attains the age of majority, his doctor, nurse, academic registrar, landlord or bank needs these documents to speak with you.

Having the documents in place can bring peace of mind. Busy Gen Z’s need time to learn how to “adult.” They feel overwhelmed by the financial side of “living their best life.”

If you insist that Junior sign his legal documents before leaving home, you have done him a favor.

With these documents, you can lead Junior by example in dealing responsibly with adult challenges. These could be “surprise medical bills,” health insurance reimbursements, credit card billing, income tax issues. Once you shown him how to manage such challenges, he will thrive. And you can relax and just be the proud parent!

Since Gen Z’s are the digital generation, make sure you have a well-crafted durable power of attorney with digital asset powers. If the unthinkable happens, you will want to be able to access Junior’s Instagram or other social media accounts in an emergency.

If Junior doesn’t execute a health care proxy, you will wish he did when he is in an urgent care facility located ten hours away!

Junior should also share a list of credit card and financial accounts with the customer service number for each account. That way, if he misplaces his credit card, it is easy to report. Also note his digital accounts numbers, usernames and passwords (i.e., student identification username and password, and the health insurance username and password).

For more practice tips on estate planning for your family, contact Jane.