Choupette’s Legacy – Why Estate Planning Matters

Choupette royalIt is speculated that Choupette Lagerfeld, the pampered Parisian pet of the iconic late German fashion designer, Karl Lagerfeld, may have a stake in Lagerfeld’s vast fortune.

Choupette Lagerfeld moves in the circles of the rich and famous. Ironically, her most universal legacy could be to demonstrate why estate planning matters for everyone, wealthy or not.

Choupette’s situation makes clear that a clever estate plan can transform the impossible into the possible.  With an estate plan opting into German law (which, on information and belief, may allow the use of pet trusts), even a cat living in France (the law of which apparently prohibits an animal from inheriting) can become an heir.

If Karl Lagerfeld died without any estate plan, and if Choupette had not already amassed a fortune of her own through social media and advertising, she could descend rapidly into a downward spiral from riches to rags by taking nothing from her master’s estate.

An estate plan enables anyone with property (whether a fortune or a modest estate), to literally reach back from the grave, provide for loved ones (including pets) and retain some residual control over those left behind.

An estate plan can protect an unmarried, unrelated cohabitant by allowing her to remain in your home after your death, with any inheritance tax liability paid from life insurance or liquid funds in your residuary estate.

An estate plan can protect an inheritance for a special needs child without disqualifying the child from Medicaid or Supplemental Security Income.

An estate plan can ensure that the life savings you worked hard to accumulate (and your personal affairs) will be kept private by avoiding probate with a revocable trust.

An estate plan incorporating an irrevocable trust or lifetime gifting can help reduce inheritance taxes legally.

An estate plan (using a trust) can protect your life savings or your life insurance proceeds from being blown by little Johnny on a Maserati, upon reaching age 18. An estate plan can even bring hope to beleaguered parents and grandparents everywhere.  Suppose your heart’s sole desire is for little Susie or Johnny to take medication/ finish college/ remove the tattoos/get a haircut and get a real job. Having all your post-mortem dreams ultimately come true could be as simple as leaving a conditional bequest in your last will and testament or trust. However, conditional gifts are very rarely written into wills or trusts due to the heartache and hard feelings caused.

Choupette’s legacy teaches us that even if your estate is limited, the possibilities are not.  For best results, consult an experienced and knowledgeable tax and estate planning attorney, who can help you effectuate your testamentary intentions.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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 Planning In Incapacity: Brennan and Dale’s Excellent Adventures

Medicaid Planning In Incapacity

Medicaid is a joint federal and state program that provides funding for medical and long-term care to individuals with very low income and assets. Generally, a single individual cannot qualify for Medicaid unless her assets are less than $2,000 and she has gross monthly income below the sum of $2,313 (or if she does not, she uses a Miller Trust or a Qualified Income Trust correctly).  Where only one member of a married couple is applying for Medicaid, the healthy spouse may be able to retain up to the sum of $126,420 in 2019. Greater savings may be feasible with Medicaid planning.

Certain strategies can help you legally avoid unnecessary tax liability, avoid Medicaid liens and protect your assets, while facilitating eligibility for Medicaid and other means-tested public benefits.  Asset protection planning can preserve funds to pay for the “extras” that Medicaid cannot pay for, ensuring your loved one a measure of dignity and comfort. It can also protect the family home and even preserve a legacy for the children.

Planning strategies can include deeds, outright gifts, gifts in trust, and the purchase of Medicaid compliant annuities.  If the individual is able to enter into a legal and binding contract, execute a legal document and make decisions, public benefits planning can be done by the individual.  If this is no longer possible, the next option would be to plan through an existing general durable power of attorney.

But what if there is no power of attorney, or the existing power of attorney cannot be used?  Suppose step-brothers Brennan and Dale cannot get along but their parents, Nancy and Robert, named them as their decision-makers on their respective general durable powers of attorney, and the documents require Brennan and Dale to act jointly?  If Nancy and Robert are now incapacitated, using the power of attorney is not a viable option.  Nor will it be, if both Brennan and Dale refuse to serve and there is no other agent.  In this situation, Nancy and Robert could still benefit from Medicaid and tax planning through a guardianship.

The courts of New Jersey and many other states recognize that as incapacitated individuals, people like Nancy and Robert still have the right to restructure their finances through lawful tax and Medicaid planning as if they were able to act independently.  Once certain factors are established, a court is authorized to approve tax and Medicaid planning in the best interests of the incapacitated individual.  In these situations, asset protection planning may be accomplished through a guardianship.

An experienced and knowledgeable elder law attorney can help you determine whether your loved one needs tax or asset protection planning, and if so, when that planning can be authorized and carried out through a guardianship.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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 Estate Recovery and the Home

Jane Fearn-Zimmer explains Medicaid Estate Recovery and the Home

MLTSS Medicaid pays for long term care for individuals with low income (below $2,313 gross monthly in 2019) and low assets.

Post-mortem (after death) Medicaid liens protect the fiscal integrity of the MLTSS Medicaid program by attaching to property held by a Medicaid enrollee at death. In most cases, such Medicaid liens are imposed upon property held by a former Medicaid enrollee to recoup the cost of care and services provided to the enrollee after reaching the age of 55. After the death of the Medicaid beneficiary, the Medicaid estate recovery program collects on the Medicaid liens, with the lien proceeds being paid to the government.

In most cases, Medicaid liens attach only to property in which the Medicaid enrollee held an interest at the moment immediately before death. If the Medicaid enrollee retained no interest just before death, there is nothing subject to a Medicaid lien.

An important planning strategy is to remove the name of the future MLTSS Medicaid recipient from the title to valuable property, such as a home. If the future Medicaid recipient is married, often this property can be transferred to the healthy spouse without any Medicaid penalty period, even during the five year Medicaid look back period.

If the future Medicaid enrollee’s name is not removed from the property at the correct time, a Medicaid lien on real property can cloud title, accelerate a mortgage, and potentially place the property in foreclosure.  Even if the mortgage is not accelerated, the Medicaid lien must be paid before the real property can be sold, given away or refinanced.  Consequently, that is one reason why you should only trust your Medicaid application to an experienced Medicaid attorney, who can determine the best strategy to avoid a Medicaid lien.

Every case is different.  Irrevocable trusts will be suitable for some clients; others may be able to transfer the home without incurring a Medicaid penalty period, where there is a blind or disabled child, a sibling with an equity interest in the home, or, less frequently, to a caregiver child.  There are also some limited exceptions to Medicaid estate recovery.

The good news is that an experienced and knowledgeable elder law attorney can explain how to protect your home and your life savings, even if your loved one is already in long-term care.

Questions? Let Jane know.

Jane Fearn-Zimmer is a shareholder in the Elder and Disability LawTaxation, and Trusts and Estates Groups. 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.