Don’t be the Executor if you can’t do the Job

When you create an estate plan, you are selecting people whom you trust to perform various jobs for you and your beneficiaries. You may be selecting an agent to act as your Power of Attorney. You may select a medical decision-maker in case you become mentally incapacitated. You may have a Trust and select the Trustee who will manage the money for the beneficiaries. And you may be selecting an Executor who will handle your estate after you pass away

People often feel that being named as Executor is a big honor. Disputes have erupted within families when one child rather than another was named as Executor. Sometimes the person who was named as Executor wants the power and control that come along with the title of Executor, but ignores the responsibilities that come with it. Other times, the Executor has financial troubles of their own, starts “borrowing” funds from the estate, and just lets the estate lie around for years without paying the bills, paying the inheritance taxes or selling the property.

The Executor is a fiduciary — entrusted by law to handle “other people’s money” — and has duties to the funeral home, the tax authorities, the estate’s creditors, and ultimately, to the beneficiaries. Although an Executor is not obligated to reveal every step and every action to the beneficiaries, at some point, the beneficiaries will want to see an accounting so that they know that the amount of their distribution is correct. Reconstructing an accounting after several haphazard years of erratic management of estate assets can be a nightmare that leads to lawsuits brought by beneficiaries.

Managing an estate can be very time consuming. Dealing with third parties to obtain date-of-death values and payoff amounts for debts, tracking down missing assets, and selling real estate can turn into big chores. But the Executor has those duties and obligations.

Ideally, every Will has a list of successors written into it in case the Executor refuses to accept the appointment or decides to resign. But turning over an estate to a successor can create problems of its own, and a process must be initiated through the Surrogate or Court to be discharged as Executor.. Better to think carefully before stepping up to the plate and taking on the responsibility in the first place if you have any doubt of your ability to complete the task.

Call us for advice and assistance with estate administration, and ask about the fiduciary services we provide .. 732-382-6070


Estate Recovery and Medicaid Liens

“If I go into a nursing home, will the State take my house?” This is a commonly-asked question. The answer is “No, but …” If a person applies for long-term care Medicaid benefits, his available assets have to be below a certain level. The house he owns generally has to be listed for sale (called a “Plan of Liquidation”), but this requirement is waived (or deferred) if there is an immediate family member residing there, such as a spouse or child or sibling. In New Jersey, the State does not place a lien against the property during the Medicaid recipient’s lifetime. Some other States do so; these are referred to as “TEFRA Liens.”  (Social Security Act 42 USC § 1917(a)(1)-(2)). So, if the property is on the market and then is sold, the individual would then lose eligibility for Medicaid benefits until the proceeds of sale have been “spent down.” If the individual dies and still owns the house, the house will be in his/her estate, and federal law requires States to seek recovery from the Estate of the deceased Medicaid beneficiary, for the value of correctly-paid Medicaid services provided after age 55.

Under some circumstances, the State must defer recovery until a later date. The 2016 CMS Coordination of Benefits Handbook in Chapter III.B. provides a succinct explanation of estate recovery starting at page 53.

Under federal law, the State Medicaid Agency  (SMA) may only make recoveries from the beneficiary’s estate under the following circumstances:  (a) After the death of the surviving spouse (regardless of where the spouse lives);  (b) When the deceased beneficiary’s children have all reached age 21; (c) after the death of a child of the beneficiary who is blind or disabled, regardless of where the child lives. The State cannot even record a lien against the property while there is still a surviving spouse, child under 21 or blind or disabled child.  In addition, New Jersey has a policy that if another family member was residing in the premises at the time of the death of the institutionalized Medicaid recipient, and continues to reside there, the State will record its lien but will not enforce it until the person moves out or the property is sold. See attached: The_NJ_Medicaid_Program_and_Estate_Recovery_What_You_Should_Know

Very often, transferring ownership of real estate is an important component of nursing home care planning, but there are also circumstances where it just cannot be done, or is not done, before the Medicaid recipient dies. The estate administrator or executor then needs to be aware of the ramifications of the Medicaid lien against the estate’s assets so that the estate administration can be correctly managed.

Call us about Medicaid eligibility planning and estate administration ….. 732-382-6070

Tell your Executor where you’re keeping your Will

Recently I got a call from the child of a client of mine who had just recently passed away. The child was panicky because they could not locate Mom’s Last Will and Testament. Mind you, this particular Mom was a very organized person. Bills were always paid on time; the house was meticulous; papers were looked at, dealt with, and either filed, scanned  or discarded. The Mom had reviewed and updated her estate plan just two years ago, and had informed the children just what the plan was. But they couldn’t find the original document.

I’ve gotten plenty of calls like that over the years. The problem is that only the original Will can be brought to the Surrogate for probate. Until the Last Will and Testament is probated at the county Surrogate, the probate Estate — which is all the assets owned by the deceased person that aren’t co-owned, and have no beneficiary — is in limbo. The person named as executor cannot act. A house can’t be listed for sale, bank accounts can’t be touched, stocks can’t be sold. The probate process is a quick and easy process in New Jersey,  but without an original Will, the plan so carefully crafted can’t be implemented without a court proceeding. Most legal problems have a remedy, and there are some interesting published cases concerning Wills that were lost, such as the Estate of Erlich. But these cases can consume a lot of time, and all the heirs have to be given notice. That means that if there is dissension in the family,  the situation invites a fight.

This same principle applies to other estate plan papers — we had a case once where the Deed said the property was titled in the name of a Trust, but no one could find any trust documents! We couldn’t even tell from the deed whether it was a revocable or irrevocable trust.

So pick a safe and sensible place to store your original Will, and make sure your Executor knows where to look for it when the time comes.

Call us to review or update your estate plan, and for trust and elder care planning … 732-382-6070

Protect your Occupants with Documents

Child moves into parent’s home with his family, with no lease, no written agreement. Stays there for decades and at some point, the parent dies.What rights do they have, and what obligations?  Aging parent moves into child’s home, perhaps a “mother-daughter” structure or perhaps using a bedroom within the main part of the house, with an informal arrangement for sharing expenses. What rights does she have, and what obligations? Will Medicaid try to treat her contributions for household expenses as “gifts to the child,” resulting in a transfer penalty and denial of benefits?

We all know about these arrangements. There may or may not be other children who are affected by the situation. A recent unpublished Appellate Division case called Graber v. Romano ( App. Div. 38-2-5858) highlights the problems that are created when there are no formal documented arrangements:

Pauline Romano owned her home and allowed her son Lawrence, daughter-in-law Cindy, and their children to move in with them in approximately 1987, without any written or even oral lease. Lawrence Romano died in 2005. At some point, Mrs. Romano transferred title to her home to a different daughter, Maria. Mrs. Romano died in 2012 and Cindy & her daughter Julia just stayed there without paying any rent.  This eventually lead to a suit by Maria — who was the owner of the property now — to eject Cindy and Julia from the premises so that the property could be sold. They didn’t move out, and appealed the order. The Appellate Division affirmed the ejectment and also ordered the case remanded to calculate their fair market rent retroactive to December 8, 2011.

The owner of real estate has the right to rent out all or part of his property and collect an agreed-upon rent. The owner retains the legal obligation to make sure the taxes, insurance, and water/sewer get paid, and that the property is maintained in a habitable obligation. The tenant then acquires rights to continued occupancy based on the terms of the lease. Generally, the lease only lasts as long as the owner still owns the property – subsequent owners have the right to choose whether to retain a tenant, and can re-negotiate a lease, or ask them to move out by a certain date.For more on tenant-landlord relationships see the NJ Department of Community Affairs website.

When the property owner dies, the property is owned by the Estate unless it was already jointly owned in some fashion with another person (in which case it now may belong to them). The Executor of the Estate has obligations to marshall the assets, pay all the bills and taxes, and then divide up the assets and distribute them according to the Will or according to law of intestacy if there is no Will. The house may need to be sold. So the child now has a new relationship as a tenant of the Estate,  often with a brother or sister (the Executor) as the landlord. Sometimes the lease or the Will has instructions of what rights the tenant retains at that point. However, if there was never any formal agreement as to a lease, the child may be merely an at-will occupant who lived there with the tacit consent of the parent.

Over the years, my clients have explained their reasons for not creating a document to formalize  the inter-family legal relationships. They didn’t like the feel of a formal arrangement. They didn’t want to get a lawyer involved. They wanted to just keep it a private affair. They had a “verbal” agreement to help out Dad in exchange for no rent. They couldn’t bear to think of death or divorce. And so on. Unfortunately, the minute anything happens to change the situation, it’s no longer a private matter. Other people get involved, whether that’s the rest of the heirs or the Medicaid agency that is doing its 5 year lookback or insisting that a property be listed for sale. If someone else becomes the legal guardian of the parent, they may not allow this child to remain in the house. Or they may insist that s/he start paying a fixed monthly rent. If the parent dies, the child’s previous permission to live there could end, regardless of whether expenses are being paid. And if the parent is living in the child’s house, and the child gets divorced or passes away, the parent’s right to remain in those premises will likely be uncertain at best.

I suggest that families in these situations create documents that confirm their obligations and their rights, even though this means you have to “think about the unthinkable.” Run a budget to see the average monthly cost of the house over the prior year – include everything such as all utilities, cable, taxes, cleaning and maintenance. Fix a method for sharing of expenses. Consider having  the occupant pay rent, like a tenant would. Consider paying  the recurring bills with 2 checks/payments, one from the parent and one from the child, split pro rata based on how many people are in the household. If the child has 4 people in her family, the parent would pay 1/5 or 20% and the homeowner would pay the rest.  Capital expenses would be the responsibility of the owner, although in commercial real estate transactions, some percentage of rent is designed to provide a profit that can then be used for such repairs when they arise. If a parent is paying rent to a child, keep in mind that Medicaid could look at whether it was a substantiated fair market rent, because excess rent could be treated as a gift to the child. Create an occupancy agreement which protects all the parties, and have the signatures witnesses by independent witnesses or notary. The homeowner can also put language into his/her Will to specify some protections. Each situation has to be addressed on an individual basis.

Unfortunately, verbal agreements can be difficult to enforce and only “worth the paper they’re written on.” Family and estate disputes involving these uncertain informal arrangements can be devastatingly costly. Careful planning can prevent a crisis. Formality at the start — like a prenuptial agreement — can prevent huge problems later.

For legal advice on elder care life planning and residential arrangements, call 732-382-6070



Banks are pummeling their customers with aggravating procedures

Many of our clients are aged and many of our clients are fiduciaries for other people in  roles such as Agent under Power of Attorney, Estate Administrator or Executor. NJ Rev Stat § 46:2B-19 (2013)    In a typical week our clients have to ask banks to provide documents and services that are required to enable the client to file an application for public benefits, pay expenses for an estate, transfer stock held by a deceased person, answer questions posed by the caseworker on a Medicaid application, or open and close bank accounts using a Power of Attorney. It seems like each year, the bank’s procedures become more onerous. For elderly clients it can be a maddening experience.

Here are a few problems that have been reported to us. (1) An executor of an estate in which the estate held bank accounts at a certain national bank which is related to an investment/securities firm needed to transfer stock. The transfer agent’s paperwork  required that the Executor’s signature be Medallion Guaranteed. The bank wouldn’t provide their customer with the Medallion Guarantee because the estate hadn’t set up a brokerage account and only held bank accounts. (2) The person who is named as Agent under a Durable Power of Attorney (POA) which has banking powers attempts to transact business at a bank, such as getting their signature on file or opening or closing an account for the customer who had signed the POA..  Some banks demand a current authorization (clearly a violation of state banking law). Yet there is a presumption that a POA is still in effect and a third party can rely on it. NJ Rev Stat § 46:2B-8.3 (2013)  and      NJ Rev Stat § 46:2B-8.5 (2013) Since the principal is often incapacitated and cannot sign anything, the bank will renege but will demand that the Agent for the customer sign an Affidavit that the POA is in full force and effect. Although this may violate the law,NJ Rev Stat § 46:2B-8.3 (2013)   this may not be too bad as long as the bank provides the form. However the personnel sometimes simply refuse to accept an older POA, and tell the customer to go get the necessary document on their own. (3) Further, some banks are now demanding that the Agent go back to the attorney who prepared the POA for a certification that it is a true original!! That attorney may be deceased or be inaccessible. This is a requirement that is clearly burdensome and unwarranted.NJ Rev Stat § 46:2B-13 (2013)

Executors needs to gain access to the decedent’s accounts so that they can pay the bills. For an estate that will be taxable, State banking statutes allow the bank to release up to half of the account to the Executor in advance of receiving the tax waivers from the State, and also allow the bank to issue a payment directly to the Division of Taxation. (4)  Some banks are refusing to release any funds without receiving a tax waiver first. (5) Other banks will only deliver the tax check directly to the treasury, which means the Executor can’t control the process — yet the Executor is personally liable for payment of the taxes if the estate doesn’t do so.

(6) People who are filing a Medicaid application to pay for nursing home care have to produce 5 years of bank records and cancelled checks (for the look-back) to support the application. Some banks charge $5 a page, and $5 for every cancelled check copy. The application is being filed for a person who is out of money. These fees could add up to a thousand dollars. Who can pay this? If the Agent under Power of Attorney or the next of kin is doing a good deed by preparing and filing this Medicaid application, why should they be expected to pay such fees? What about the aged spouse who is also only allowed to retain limited assets when applying for Medicaid for their ill spouse? Can they be expected to argue with a bank about such fees, or confront them and ask for a waiver?

These are only a few of the more common examples. Government agencies, brokers, and other entities  are becoming more particular about the documentation they require, but many procedures are overly burdensome, cause extensive delays, and are plainly unnecessary. If you are handling the finances for someone, you may wish to ask questions about these fees and procedures so that you can choose the institutions that will serve your needs and will facilitate rather than hinder your efforts.

For legal advice and advocacy concerning elder care or your responsibilities as a fiduciary call us at 732-382-6070