Tag: estate administration

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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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Helping Someone With Dementia Sell the Home

On By Jane Fearn-Zimmer, Esq.In Dementia, Elder Law, Estate Planning, Guardianship, Long-term care, MedicaidLeave a comment

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.

Estate Administration in the Digital Era: Digital Assets, Cryptocurrency and More

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

Digital Assets and Cryptocurrency

The probate proceedings for the estate of the late musical artist, Prince Rogers Nelson, have been repeatedly profiled in the national news for a variety of reasons. Here are some digital age strategies for dealing with cutting-edge estate administration issues, including identifying heirs, working with digital assets and block chain technology, and administering estate assets in specialized industries.

  1. Genetic testing can determine the rightful heirs. If parentage may become an issue, obtain an order authorizing DNA testing of the decedent’s blood sample as soon as possible after death. Obtain a court order for genetic testing of purported heirs early on in the proceedings.
  1. Identify, catalogue, disclose and value digital assets. Digital assets include a wide variety of electronic files and works. Some examples are digital accounts (i.e., social media, e-mail and online commercial accounts such as Etsy and Amazon), video and audio files and electronically stored media (such as photographs, art, music, and original works and blogs), knowledge stored in electronic databases or formats (i.e., software and architectural plans). Cryptocurrencies (Bitcoin) and block-chain technologies are also digital assets. Some forms of digital assets are more easily monetized than others. Digital assets are regarded as personal property by the taxing authorities and as such, must be clearly identified and properly valued on death tax returns. See I.R.S. Notice 2014-21. In some cases, discounts for lack of marketability may be appropriate. Initial coin offerings (ICO’s) may be subject to registration requirements under the Securities Exchange Act of 1933.
  1. Hire experts for specialized industries. Prince’s estate held a wide range of intellectual property. The personal representative faced unique business challenges, such as operating multiple entertainment businesses, overseeing a real estate portfolio and a museum, archiving a vast quantity of audio and video assets, and safeguarding personal property. The use of entertainment and other industry experts was needed to help monetize the estate’s assets.
  2. File any confidential information disclosed to the court under seal. Consider whether to file sensitive information under seal. Sensitive matters could range from business and licensing negotiations and confidential litigation settlements to details relating to parentage.

Questions? Contact Jane.

Jane Fearn ZimmerJane Fearn-Zimmer is an Elder and Disability Law, Taxation, and Trusts and Estates attorney. 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. She also serves as Chair of the Elder & Disability Law section of the NJSBA.

Medicaid and Gifts

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & GiftsLeave a comment

Medicaid in New Jersey

Medicaid will not pay for long term or home and community based care during a Medicaid penalty period. A penalty period will generally be imposed where uncompensated gifts have been made during the five years immediately preceding the filing of the Medicaid application. This period is known as the Medicaid lookback.  The length of the penalty period is computed based on the total amount of gifts during the look back period. Under the current Medicaid divisor, approximately one month of ineligibility is imposed for every $10,000 given away during the lookback period.

Many applicants are unaware that there is a rule, which applies to Medicaid applications filed in New Jersey after May 26, 2010, as well as to Medicaid applications filed in other states, including Ohio, preventing recalculation of the penalty period where some, but not all of the gifts made during the lookback period, were returned. The rule, as stated in New Jersey, is found in Medicaid Communication 10-06 and requires that the penalty period cannot be decreased for the returned gifts unless all of the assets given away have been returned.  This rule can have very harsh consequences, which are illustrated in a recent case from Ohio.

In Paczko v. Ohio Dept. of Job & Family Servs., (2017 OH 9024 (Oh. Ct. App., 8th Dist., Cuyahoga County, No. 105783, Dec. 14, 2017), an elderly woman transferred the sum of $146,122 to a trust, which would benefit her children. She later applied for Medicaid during the five year lookback period. The sum of $89,227.38 was returned from the trust to the elderly woman to pay for her care. She sought to reduce the original Medicaid penalty period computed on the total transfers during the preceding five years, by the sum of the returned gifts.  At the Board level, the Ohio Medicaid agency gave her limited for her returns, and denied her request for additional credit for all of the gifts returned. Her appeal was denied at both the Staff Hearing Officer and Court of Common Pleas levels.

While the Paczko case is not binding on the New Jersey courts, the case is a good illustration of what can happen when there is a partial return of gifts without further planning and a Medicaid application is filed within the five year lookback period. The take away from Paczko is that, in New Jersey, as in Ohio, applicants for Medicaid re well-advised to be mindful of the “no credit for partial returns” rule and to consult an attorney before filing any Medicaid application, or proceeding to a Medicaid Fair Hearing, to determine what solutions may be available.

Questions? Let Jane know.

Gifts and Medicaid: Gifting to Children and Grandchildren

On By Jane Fearn-Zimmer, Esq.In Elder Law, Medicaid & Gifts, UncategorizedLeave a comment

Gifts and Medicaid in New Jersey

Clients often ask me, can they make gifts to their children and grandchildren without a problem concerning Medicaid?  Often, what they have in mind is the $15,000 annual exclusion, which is a federal provision, not a Medicaid regulation. The $15,000 annual exclusion permits a taxpayer to give up to $15,000 away per year without being required to file a gift tax return. Married couples may split gifts and currently give up to $30,000 per person per year if they both agree.

But the federal tax rules and the Medicaid rules are “apples and oranges” in this case. Different rules apply here for Medicaid than for tax purposes. While a gift of less than $15,000 would not require a federal gift tax return, even small gifts, payments of medical and educational expenses of others, and gifts to children and grandchildren and others, of any amount, can jeopardize Medicaid coverage for long-term care for New Jersey residents.  This is because of the rules which apply during the five year Medicaid look back period. If there are any gifts made by the Medicaid applicant within the five years immediately preceding the filing of the applicant’s first Medicaid application, all of the gifts made during that five year period will be totaled and a Medicaid penalty period corresponding to the value of the total gifts will be imposed. Due to the Medicaid penalty period, Medicaid will generally deny coverage for long-term care, for a period of time corresponding to the total amount of all of the gifts made during the five years immediately prior to the filing of the Medicaid application.  Under the current New Jersey policy, even if some of the gifts are returned, the total amount of all of the gifts made during the lookback period can be subject to a Medicaid penalty period. This can have disastrous results on a Medicaid application.

For example, assume that Billy and Sue are husband and wife and they together make $92,000 in gifts to their children between February 1, 2012 and January 31, 2017. If a Medicaid application was filed for Billy in the month of February, 2017, even if $90,000 of the gifts are returned by the children back to Billy and Sue, a Medicaid penalty in the sum of $92,000 can be imposed on Billy and Sue because that was the amount of the total gifts made during the five year Medicaid look back period for Billy.

Fortunately, there are sometimes strategies available to push back against this very harsh result.  When filing any Medicaid application in New Jersey, consulting with an experienced elder law attorney is advised.

Questions? Let Jane know.