Proving the hardship exception to the Medicaid penalty period

If you transfer assets within five years of applying for Medicaid, you will likely be subject to a period of ineligibility. There is an exception, however, if enforcing the penalty period would cause the applicant an “undue hardship.” This exception is difficult to prove and rarely granted, but it may be available in certain circumstances.

Under federal Medicaid law, the state Medicaid agency must determine whether an applicant transferred any assets for less than fair market value within the past five years. If there are any transfers, the state imposes a penalty period, which is a period of time in which the applicant will be ineligible for Medicaid benefits. The length of the penalty period is calculated by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in the state.

A Medicaid applicant can fight the penalty period by arguing that enforcing it will cause an undue hardship. Federal law provides that an undue hardship exists if the penalty period would deprive the applicant of: (1) medical care necessary to maintain the applicant’s health or life; or (2) food, clothing, shelter, or necessities of life. The burden is on the applicant to prove that hardship exists. A nursing home can pursue a hardship waiver on behalf of a resident.

Proving an undue hardship is difficult because the applicant needs to show that he or she can’t afford nursing home care during the penalty period and that without nursing home care, his or her health will decline. In addition, states are free to define “hardship” as they see fit and courts vary on how they enforce the exception.

If you believe you may be entitled to an undue hardship waiver, contact one of our seasoned attorneys.

Family dispute illustrates need for long-term care plan

A recent New Jersey court case demonstrates how important it is for families to come up with a long-term care plan before an emergency strikes.

The case involved two brothers who got into a fight over whether to place their mother in a nursing home. R.G. was the primary caregiver for his parents, as well as their agent under powers of attorney. After R.G.’s mother fell ill, R.G. wanted to place her in a nursing home. R.G.’s brother objected, but R.G. went ahead and had his mother admitted to a nursing home without his brother’s consent. R.G.’s brother sent angry and threatening texts and emails to R.G. as well as emails expressing his desire to find a way to care for their parents in their home. Eventually the men got into a physical altercation in which R.G.’s brother shoved R.G.

R.G. went to court to get a restraining order against his brother under New Jersey’s Prevention of Domestic Violence Act. A trial judge ruled that R.G. had been harassed and assaulted and issued the order. But a New Jersey appeals court reversed the trial court, ruling that R.G.’s brother’s actions did not amount to domestic violence. According to the court, there was insufficient evidence that R.G.’s brother purposely acted to harass R.G.

If the brothers had sat down with their parents before either of them needed care to explore options and determine their wishes, this drawn-out and costly dispute might have been avoided. Putting a long-term care plan into place before a crisis develops can help avoid family conflicts like this one. Contact us if we can help you in any way.

Estate Tax Good News

For years, I have helped clients minimize or eliminate the New Jersey estate tax and federal estate tax as part of clients’ Wills and Trusts. In particular, the New Jersey estate tax impacted many residents of this State because until January 1, 2017 New Jersey levied an estate tax on estates exceeding $675,000.

In the past 13 months, however, New Jersey has substantially changed its estate tax laws. First, on January 1, 2017, New Jersey raised their estate tax exemption to $2 million. Then, effective January 1, 2018, New Jersey’s estate tax was repealed. This is a game changer for estate planning in New Jersey.

The federal estate tax is a tax assessed on estates valued above the federal estate tax exemption amount in effect during the year the decedent passed away. The federal estate tax exemption amount gradually increased over the past 10 years to the sum of $5,600,000 as of January 1, 2018.

However, that number was doubled to $11,200,000 under the federal tax legislation passed by Congress and signed by the President earlier this month. And, since the estate tax is deferred for married couples until the second spouse dies, a married couple with optimal estate tax Trusts in their estate planning documents can shield $22,400,000 from federal estate taxes.

These New Jersey and federal estate tax changes mean that only the most-wealthy folks will be required to pay estate taxes. This is good news for everyone who do not want the government to take a piece of their estates. It should be noted, however, that political and government budget issues will likely shape future estate tax laws.

Previously, the New Jersey estate tax was assessed on estates exceeding $675,000, a small number when you consider that the taxable estate includes real estate and all accounts including the death benefit of life insurance policies. In doing so, the New Jersey Division of Taxation collected hundreds of millions of dollars in estate tax revenue each year that will not be collected under the new laws.

Many estate planning attorneys, including this one, believe that New Jersey could bring back their estate tax in order to recoup the tax revenues that the State previously received from its estate tax. The same factors could drive the federal government to reduce the federal estate tax exemption, as well. Time will tell the future of estate tax law.

In the meantime, I recommend that everyone have their existing Wills and Trusts reviewed by an estate attorney to see if they should be updated to conform with the recent estate tax law changes.  For now, simple Wills without estate tax Trusts should suffice for most client’s estate planning documents.  But it is important to review prior Wills and Trusts to be sure that the old planning documents work well with these new estate tax laws.

It should be noted that New Jersey has retained its inheritance tax, which is a separate tax imposed upon New Jersey estates where the beneficiaries are not spouses, children, grandchildren or parents. The New Jersey inheritance tax applies to inheritances received by siblings, nephews, nieces, cousins, aunts, uncles, friends and step-grandchildren (but not step-children). The inheritance tax rates range from 11% to 16%.

To learn more about how your estate may be impacted by these changes, click here or 856.782.8450.

Use your will to dictate how to pay your debts

The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs on how to pay your debts. While generally heirs cannot inherit debt, an estate’s debt can reduce what they receive. Spelling out how debt should be paid can help your heirs.

If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would have preferred to leave to specific heirs. There are two types of debts you might leave behind:

  • Secured debt is debt that is attached to a piece of property or an asset, such as a car loan or a mortgage.
  • Unsecured debt is any debt that isn’t backed by an underlying asset, such as credit card debt or medical bills.

When you leave an asset that has debt attached to it, to your heirs, the debt stays with the property. Your heirs can either continue to pay on the debt or sell the property to pay off the debt. If you believe this would cause a burden for your heirs, you can leave them assets in your will specifically designated to pay off the debt.

In the case of unsecured debt, although your heirs will not have to pay off the debt personally, the executor will have to pay the debt using estate assets. You can specify in your will which assets to use to pay these debts. For example, suppose you have a valuable collectible that you want one of your heirs to have. You can specify that the executor use assets in your bank account to pay any debts before selling the collectible. If you want to leave certain liquid assets, like a bank account, CD, or stocks, to an heir, you should designate in your will what you would like your executor to use instead to satisfy debts.

Not everyone needs to spell out how to pay debt in a will. If your debt is negligible or your entire estate is going to just one or two people, it may not be necessary, but contact your attorney to formulate a plan.

TREEL Continues Its Growth With Addition of Nancy Perry

As its clients’ needs continue to grow along with the forthcoming changes in the tax laws directly effecting estate and elder law planning, Timothy Rice Estate and Elder Law firm (TREEL) welcomes Paralegal Nancy Perry to the firm’s Voorhees office. 

Perry, a Sicklerville, NJ resident,  brings more than 20 years experience as a legal and judicial secretary, as well as most recently a Paralegal Specialist/Special Probate Clerk with the Office of the Hudson County Surrogate’s office in Jersey City, NJ. Her responsibilities there were very broad dealing with probate practices and procedures in the Surrogate’s Court, including reviewing and preparing drafts of legal documents pertaining to a variety of Probate and Family matters.

Timothy J. Rice, TREEL’s founder and managing partner commented, “ Nancy’s extensive experience and knowledge of the operations of Probate Court is an invaluable expertise to our clients and our practice.  Guardianship and trustee issues in Estate Planning & Probate have become increasingly more prevalent; TREEL is now in an even better position to provide our clients with the extraordinary service for which we have become known.”

Since 1991, Timothy Rice has helped individuals and families in New Jersey and eastern Pennsylvania to navigate the complex legal, medical and financial aspects of estate planning and administration, estate litigation, Medicaid planning, and other elder and veteran law issue.

To learn more click here.

How Medicare and employer coverage coordinate

Medicare benefits start at age 65, but many people continue working past that age. That makes it important to understand how Medicare and employer coverage fit together.

Depending on your circumstances, Medicare is either the primary or the secondary insurer. The primary insurer pays any medical bills first, up to the limits of its coverage. The secondary insurer covers costs the primary insurer doesn’t cover (although it may not cover all costs). Knowing whether Medicare is primary or secondary to your current coverage is crucial because it determines whether you need to sign up for Medicare Part B when you first become eligible. If Medicare is the primary insurer and you fail to sign up for Part B, your eventual Medicare Part B premium could start going up 10 percent for each 12-month period that you could have had Medicare Part B but did not take it.

Here are the rules governing whether Medicare coverage will be primary or secondary:

  • If your employer or your spouse’s employer has 20 or more employees, your employer’s insurance will generally be the primary insurer and Medicare will be the secondary payer. If your employer or your spouse’s employer has fewer than 20 employees, Medicare will generally be the primary insurer and your employer’s insurance will be the secondary insurer.
  • If you are retired but still covered by your employer’s group health insurance plan, Medicare pays first and your former employer’s plan pays second.
  • If you receive both Social Security Disability Insurance and Medicare and your employer has 100 or more employees, your employer’s insurance pays first. Some employers are part of a multi-employer plan; if at least one employer in that plan has 20 employees or more, the employer’s insurance pays first. If your employer has fewer than 100 employees, Medicare will pay first.
  • If you have end-stage renal disease (ESRD) and are in the first 30 months of Medicare coverage of ESRD, your employer’s plan pays first. After the first 30 months, Medicare becomes the primary insurer. It does not matter how many employees your employer has.
  • If you are self-employed and have a group health plan that covers you and at least one other person, Medicare pays first. Note that if you are self-employed, you may be able to deduct Medicare premiums from your income taxes by including the premiums in the self-employed health insurance deduction.
  • If your employer’s insurance is the primary insurer, the employer must offer you and your spouse the same coverage that it offers to younger employees. It also cannot deny you coverage, cancel your coverage once you become eligible for Medicare, or charge you more for premiums, deductibles, and co-pays.

Don’t learn these lessons the hard way, contact one of our seasoned attorneys to discuss your estate planning needs.

Four provisions people forget to include in their estate plan

Even if you’ve created an estate plan, are you sure you have included everything you need to? There are certain provisions that people frequently forget to put in in a will or estate plan that can have a big impact on their heirs.

  1. Alternate beneficiaries

One of the most important things an estate plan should include is at least one alternative beneficiary in case the named beneficiary does not outlive you or is unable to claim under the will. If a will names a beneficiary who isn’t able to take possession of the property, your assets may pass as though you didn’t have a will at all. This means that state law will determine who gets your property, not you. By providing an alternate beneficiary, you can make sure that the property goes where you want it to go.

  1. Personal possessions and family heirlooms

Not all heirlooms are worth a lot of money, but they may have sentimental value. It is a good idea to be clear about which family members should get which items. You can write a list directly into your will, but this makes it difficult if you want to add or remove items. A personal property memorandum is a separate document that details which friends and family members get which personal property. In some states, if the document is referenced in the will it is legally binding. Even if the document is not legally binding, it is helpful to leave instructions for your heirs to avoid confusion and bickering.

  1. Digital assets

We are all conducting more and more business online, but there are some steps you can take to help your family deal with your digital property. You should first make a list of all of your online accounts, including e-mail, financial accounts, Facebook, and anywhere else you do business online. Include your username and password for each account. Provide access information for your digital devices, including smartphones and computers. Finally, make sure the agent under your durable power of attorney and the personal representative named in your will have the authority to deal with your online accounts.

  1. Pets

Pets are beloved members of the family, but they can’t take care of themselves after you are gone. While it’s not possible to leave property directly to a pet, you can name a caretaker in your will and leave that person money to care for the pet. Don’t forget to name an alternate beneficiary here as well. If you want more security, in some states you can set up a pet trust, under which the trustee makes payments on a regular basis to your pet’s caregiver and pays for your pet’s needs as they come up.

Contact one of our seasoned attorneys to make sure your will and estate plan takes care of all your needs.

The Case of the Missing Will

A family member has passed away, maybe one of your parents. You were told a will was created, but neither the original nor any copies can be found. What happens next?

It’s a common situation and how the law applies to the facts depends on the jurisdiction. New Jersey law is the same as that of Ontario, Canada, and an October decision from their Superior Court of Justice shows how this scenario may play out.

In the province of Ontario (and the state of New Jersey) the testator (the person creating the will) can change or revoke a will, as long as the requirements of the law are met. A will may be revoked a number of ways. The testator can destroy it or another can destroy it at the testator’s direction and in their presence. If the remains of a destroyed will are found or if there’s evidence the will was in the testator’s possession up to the time of death but it can’t be found afterward, it’s presumed to have been revoked.

This was the subject of a court battle in Ontario in which there was evidence the testator wanted seven million Canadian dollars (or about $5.5 million) to go to a charity, but the will was missing. With this much money at stake it should be no surprise the next of kin (a niece and nephew) went to court to ensure the charity didn’t get the money and that they obtained the assets of the estate.

In Levitz v. Hillel Lodge Long Term Care Foundation , the charity, the Hillel Lodge Long Term Care Foundation (Hillel) to retain the inheritance needed to show,

  • Proof the will was duly executed,
  • The deceased had it in her possession up to the date of her death,
  • The contents of the will, and
  • Rebut the legal presumption the will was destroyed by producing enough evidence to prove the testator didn’t intend to destroy or revoke the will.

In this case the first three issues were not disputed, at issue was whether Hillel could rebut the presumption. The court spelled out a number of factors that needed to be considered, but their decision the presumption was rebutted boiled down to the fact there was no evidence to show an intent by the testator to revoke the will. Key evidence was that prior to her death she told a friend she expected there would be no delay in her admission to the Hillel Lodge retirement community because she was leaving her entire estate to Hillel.The facts of every case are unique and how the law may apply in your situation may vary.

Contact one of our seasoned attorneys to discuss any estate administration questions or issues you may have.

Tips for choosing your executor

Choosing your executor, who will administer your estate and carry out your final wishes, may be one of the most important decisions you make when preparing your will.

Before you name someone, get his approval and make sure he feels up to the task. An executor’s responsibilities including filing court papers to start probate and validate the will, inventorying the estate, notifying banks and government agencies, sorting out finances, maintaining all property until it’s distributed or sold, filing a final tax return, and distributing assets.

Depending on the size and nature of your estate, this work can seem like a complicated, daunting task. Recognize that serving as executor can be particularly complicated for someone who lives out of state. He or she will likely have to travel for probate appearances, and some states require a state resident to co-serve as executor or agent.

Your executor may seek legal counsel at any time during the process, to provide advice and help him comply with all of his responsibilities. That said, you may wish to save your friend or family member the hassle and hire a third-party executor from the get-go. Executor fees are set by the state, typically as a percentage of the estate, or you can negotiate an hourly fee. When a friend or family member serves as executor, they often waive this fee. However, they are entitled to take it or otherwise reimburse themselves for expenses associated with administering the estate.

Potential reasons not to name a family member:

  • The person will be too emotionally affected by your death to function adequately
  • He or she lacks the expertise to fill the position
  • Your executor will gain from the will, suggesting a possible conflict of interest with other heirs

If you don’t want to name an individual adviser (such as a lawyer or accountant) as your executor, you can appoint someone else you trust with the understanding that he or she will interview and select appropriate counsel when the time comes.

No matter who you choose as executor, tell your heirs ahead of time so they’re not surprised. Beware of naming multiple children as co-executors. Even if they all agree on how to move forward, they’ll need to co-sign all the necessary paperwork involved in the executor role, creating headaches and delays for all involved.  But always name an alternate in case your first choice is no longer able to serve.

One of our seasoned attorneys can assist you. Click here to let us know how we can help you!

Pre-litigation claims can be effective in estate tax disputes

Pre-litigation is activity that occurs before a legal suit is filed. If you are involved in an estate transfer and your rights are unclear, pre-litigation may be an effective way to establish your position and head off a more costly legal conflict.

Pre-litigation claims are typically made in an effort to get the other party to back down or engage in negotiations. This process may be the first step in claiming a will or trust is invalid, challenging a premarital agreement, or charging that an executor is engaged in misconduct.

In a much-publicized conflict over the estate of former “Growing Pains” star Alan Thicke, for example, his sons filed a pre-litigation complaint to enforce their father’s trust, claiming that Thicke’s widow intended to challenge her prenuptial agreement. (Thicke’s widow denied such intent and a judge subsequently dismissed the sons’ claim.)

Because most parties prefer to avoid escalation when possible, pre-litigation can be a useful tool to reach resolution before the time and expense of actual litigation is incurred. Its success, of course, depends on the strength of the claim and the disposition of all parties involved.

If you stand to benefit from a will or trust and sense that a conflict may be brewing, consult a lawyer. Do not wait until the problem has reached a crisis point and litigation is unavoidable. A pre-litigation claim may be a cost-efficient way to establish your rights, find a solution, and avoid the inconvenience and disruption of a courtroom conflict. Contact one of our seasoned attorneys to discuss your estate planning needs.