In New Jersey, a surviving spouse has the right to claim his or her “elective share” of the deceased spouse’s estate if the deceased left him/her an inadequate inheritance. The calculations are made using the step-by-step process of a set of state statutes, N.J.S.A. 3B:8-1. If the individual receives Medicaid benefits and is widowed, failure to claim the “elective share” can result in a loss of benefits because it is treated by the Medicaid program as an uncompensated transfer of assets. If a person receives benefits when they are not actually eligible, they may be subject to a claim or lien for reimbursement. Federal and State law (N.J.S.A. 30:4D-7.8) requires states to place liens for reimbursement against the estates of deceased Medicaid beneficiaries. All of these issues came together in a recent Appellate Division decision called In the Matter of the Estate of Arthur E. Brown, N.J. Super. App. Div. (Simonelli, J.A.D.) (32 pp.) A-1086-14T4.
- The case involved a widower who had been disinherited by his wife. The marital assets had been transferred into her name, and he received nursing home care that was paid for by Medicaid. When she died, he didn’t file a claim for the elective share. He
continuedto receive Medicaid benefits. Upon his death, the State took the position that the value of the claim which he had failed to pursue was an asset of his estate, which was subject to the State’s lien for reimbursement. The Court held that the value of the claim was correctly included as an asset of his estate subject to lien.
The estate had also argued that the deceased wasn’t entitled to an elective share at all because he and his wife had been living separate and apart at the time of her death, and the couple ceased to cohabit as man and wife under circumstances that gave the wife a cause of action for divorce under N.J.S.A. 2A:34-2(d) or (f). The elective share statute lists this as one of the reasons that a person can be barred from seeking an elective share. Residing in a nursing home due to Alzheimer’s dementia might be sufficient grounds for the spouse to seek a divorce, but the Court wasn’t ready to go so far as to hold that the “living separate and apart” as used in the law was intended to encompass this sort of reason for the separation.
When Estate planning is being done for the community spouse of a person who needs nursing home care, the impact of the estate plan on the ill spouse’s Medicaid eligibility needs to be considered. Failing to consider the interplay of the elective share and the Medicaid rules can result in unintended consequences. Not only can there be an adverse impact on eligibility, there can be complicated impacts later which result in surprising litigation which adversely affects the heirs of the estate.
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