Planning for Later

A long-term client of mine called to tell me that he had just learned that he had a terminal illness – it was a medical problem that appeared suddenly appeared. He was about 70 and his wife about the same. Their children were self-supporting adults, out of the house. Both he and his wife were retired – he was collecting Social Security and a pension. He had always handled the family finances. The house was paid off. His wife had a lot of local friends and many volunteer activities that she enjoyed. She was frantic and had become depressed, as she couldn’t stop thinking about the space in her future that would be so empty and how she would manage things. She was paralyzed with fright. When she thought about the future, all she could see was jumbled chaos.

The husband brought his wife with him to meet with me. We talked about the survivor’s benefit on his pension and the bump-up in Social Security that she would receive. We looked over the assets and showed her how they would transition to her ownership and would not be lost. We sketched out a plan of steps to be taken “when the time comes,”  and we reviewed and updated their powers of attorney, health care proxies and Wills. We talked about ways she could keep him comfortable at home at the end, and what benefits could help with that. We discussed hospice and when it would make sense to bring in that support. The husband dictated his wishes for his funeral arrangements, which were typed up for his signature. We also mapped out the budget  so that his wife could see that she could comfortably remain in the house “afterwards.”

By focusing on a set of specific decisions and steps in an orderly way, my client’s wife became less afraid for her future. Sad, yes, but less afraid and less worried. She felt more confident that as they began moving through this terrible transition, she would have a framework for decisions and would know how to approach each decision as it became necessary.

Careful planning can prevent a crisis. Call us for advice on elder care and end of life planning….. 732-382-6070

Watch out for elective share issues in Medicaid planning

When a married person requires nursing home care, the spouse often seeks advice on how to preserve assets and minimize his/her exposure to the high cost of care. Often this will require consideration of how the Medicaid program (MLTSS or NJ FamilyCare) can help out. Assets may be transferred to the “community spouse,” and beneficiary designations may be changed. Some assets will be retained and others may be spent. There may be gifts, and there may be annuities that are purchased. Each plan is unique. The Will of the community spouse may be altered so as not to leave everything to the spouse who now requires nursing home care.

What happens if the community spouse dies first, and the institutionalized spouse is receiving MLTSS Medicaid benefits? The Executor of the Estate and the Agent under Power of Attorney for the surviving spouse will have some reckoning to do. This ‘reckoning” refers to calculating and satisfying the “elective share.”

The elective share is a statutory share of the deceased spouse’s estate. It is calculated by following the formula in N.J.S.A.3B:8-1 et seq. Basically it starts with the deceased person’s probate assets (essentially, the assets that have no beneficiaries or co-owners or that aren’t held in a living trust), minus expenses and debts, plus an array of other assets such as joint accounts, pay on death accounts, and assets that were given away within the prior 2 years. This whole combination of subtractions and additions produces what’s called the “augmented estate.” The elective share is one-third of the augmented estate. The share is “satisfied” first from assets owned by the surviving spouse or that he receives as a result of the death, and then from probate assets, and then from non-probate assets.

Sometimes it turns out that the surviving spouse gets a distribution of zero from the estate of his late spouse, but other times, the distribution is substantial, creating some havoc as the Executor tries to figure out how to make the payment — often, there is real property but insufficient cash, and the Will may leave the property to somebody specific.

Why does any of this matter? A person on Medicaid is required to seek all assets to which he is entitled, or he will face the risk under N.J.A.C. 10:71-4.10  of a transfer penalty. The Appellate Division has ruled in I.G. vs DMAHS that.  the failure to claim the elective share is a transfer of assets. If a transfer penalty is imposed, the State doesn’t pay for the nursing home for a period of time.

The Agent under Power of Attorney for a Medicaid applicant or recipient is obligated to report changes to the program. This would include notification that the person has been widowed. Typically, the County Board of Social Services then inquires about the estate of the deceased spouse and whether the Medicaid recipient has received his elective share. If the surviving spouse isn’t yet on Medicaid, then this issue will have to be addressed if the surviving spouse applies for Medicaid benefits during the ensuing five years, because at the time of the application, there is a 5-year look-back to see if any assets were given away/transferred.

What’s the risk? The risk is that Medicaid benefits were wrongfully received by the surviving spouse who failed to receive assets he was entitled to as an elective share. This further creates the risk that there was an overpayment, and the State has options under N.J.S.A. 30:4D-7.1, to pursue all culpable parties by initiating a lawsuit in Superior Court.

Careful planning can prevent a crisis. Senior care planning involves a whole array of activity, some now and some later as situations change. Call us for advice for now, and for later. … 732-382-6070

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

 

Tips on the nursing home admissions process

The need to place a beloved family member in a nursing home may be one of the most harrowing and heartbreaking decisions a person has to make. Not only is there a terrible sense of guilt and failure, but the sheer cost of a single month in a nursing home is staggering, and leaves the family with a bleak view of their future security. They feel vulnerable, because they are at the mercy of forces they cannot control, and are thrust into a world full of acronyms, shorthand and procedures they have never encountered.

At the time of application for admission, the applicant needs to provide medical information that reports the individual’s clinical condition, diagnoses, relevant recent medical history, and treatment needs, so that the facility can make an informed decision about whether it can meet the needs of the resident. This will need to be coordinated with the physician(s) at home or the hospital discharge planner, as the case may be. Although all facilities are licensed to provide the full range of services needed for a long-term nursing home resident (with the exception of ventilator services that are beyond the scope of this article), certain facilities are known informally for better handling certain kinds of situations. It could be that an applicant is denied admission due to presence or recurrence of infection, or some documented, serious behavioral disorders. For instance, a particular resident may require a private room or extra supervision. The resident may have a unique degenerative medical condition such as ALS, and would do better in a facility that has specialized services available. Or a resident may require psychiatric placement instead of an “ordinary” nursing home.

Admissions contracts should be signed by the resident himself, but can also be signed by the spouse, a Guardian or an Agent under Power of Attorney. When a fiduciary signs on behalf of a resident, the fiduciary is signing in their fiduciary/representative capacity, and is assuring the facility that they will manage the income and assets as authorized by law. There is no need for a family member to personally take on the duty to pay the nursing home bill. Commonly, a facility will ask the person who is handling the resident’s income and resources to sign as “Responsible Party.” This would amount to a personal guarantee. No one should sign as “responsible party” unless they voluntarily intend to personally guarantee the payment out of their personal assets. The Nursing Home Act (NHA), NJSA 30:13-1 to -17 prohibits a facility from requiring a third party to guarantee the bill.

The person agreeing to be Fiduciary for the resident needs to be aware that they still have obligations to arrange for the nursing home bills to be paid using the applicant’s funds, and to apply for Medicaid benefits in a timely way. See generally, Manahawkin Convalescent v. O’Neill, 217 N.J. 99, 85 A.3d 947 (2014) (fiduciary failed to turn over the income; facility sued; fiduciary counterclaimed for violations of Consumer Fraud Act; counterclaim dismissed, but Supreme Court expressed the need for contracts to be clearly worded).

If a resident is not Medicaid eligible, the nursing home’s rates can be determined by any factors it considers appropriate. The rate schedule has to be clearly and plainly disclosed in the contract. 42 CFR ‘ 483.12(c).  A nursing home cannot obligate a Medicaid-eligible resident to sign a private pay contract to gain admission or to continue residing in the nursing home. NJAC 8:85-1.4(b). On the other hand, if the resident has not yet been determined to be Medicaid eligible, and has not yet applied for Medicaid, he or she may voluntarily sign a private pay contract at time of admission. Once the individual becomes Medicaid eligible, that contract will be void. NJAC 8:85-1.4(c).

Typically, a nursing home will ask the new resident for the first month’s fee plus a one-month security deposit, at the time of admission. If the resident expects to apply for Medicaid fairly soon, s/he needs to be sure that the security deposit has been spent on the care prior to the end of the spend-down period, so that once the resident thinks they are financially eligible, it doesn’t turn out that they have an excess resource sitting in the facility’s trust account. .

Call us for contract review and advocacy in the admissions process … 732-382-6070