Tenancy by the Entirety – a form of ownership with special protections

In the recent case of  Jimenez v. Jimenez, N.J. Super. App. Div.(MAY 8, 2018) (approved for publication), the NJ Superior Court, Appellate Division rebuffed the efforts of a creditor to force the sale of a home owned by the debtor and his spouse as tenants by the entireties. Relying upon a New Jersey statute, the Court held that the legislature has prohibited spouses from severing their tenancy without the written consent of the other spouse, and therefore, the creditor of one spouse may not force such a severance in order to satisfy the debt. The statute is NJ Rev Stat § 46:3-17.4 (2013), which says: “Neither spouse may sever, alienate, or otherwise affect their interest in the tenancy by entirety during the marriage or upon separation without the written consent of both spouses. ” Before that statute was adopted in 2013, the Courts had discretion as an equitable matter to order a partition under certain circumstances. Newman v. Chase, 70 N.J. 254, 262 (1976).  The Jimenez Court did make a cautionary point: “That said, we do not preclude a remedy by a creditor against property held by tenants by the entirety when the title was deeded as a fraudulent conveyance in order to avoid known debts to creditors.”

What is Tenancy by the entireties? This  is a form of real property ownership reserved for lawfully married couples. The Deed normally uses language such as “X and Y, husband and wife,” or “X, married and Y his wife,” or perhaps “X and Y, wife and wife.” It must designate the marital relationship. In New Jersey, a couple who reside together but are not married cannot own property by the entireties. They may own the property jointly with survivorship, or they may own it together as “tenants in common” without survivorship. If the property is owned by a married couple by the entireties, then they each own 100% of all rights in the property, as neither spouse can transfer his/her interest without consent of the other spouse.  State law presumes that if a married couple acquire property, it is held by the entireties unless the Deed expressly states that they have a different form of ownership.

There are times that a married couple will choose to “sever” their ownership by transferring the property from entireties to tenants in common. However, all angles should be considered, since certain creditor protections could be lost while other objectives are accomplished.

Call for advice about senior care planning and property transfers ……… 732-382-6070

 

 

 

 

Caregiver Child Payments under Medicaid and VA Pension

In the realm of elder care, a child who resides in their parent’s home and provides the care, assistance and supervision needed to enable the parent to remain in the community is typically referred to as the “caregiver child.” Sometimes — oftentimes — the child is giving up other jobs or income in order to provide this caregiving. Frequently the parent wishes to compensate the child in some way. Tread carefully if you are arranging for such payments. There are a host of issues to be aware of particularly if the parent needs to apply for governmental benefits.

The Veterans Improved Pension and Aid & Attendance programs include payments to in-home caregivers within the category of health  expenses that qualify as Uncompensated Medical Expenses (UME’s) which can be offset against the income to reduce it to the required level for eligibility, called MAPR or Maximum Annual Pension Rate. The documentation is simple. Form 10-2410 is submitted with the application, showing the monthly rate of pay and the start date of the services. http://www.benefits.va.gov/pension/  No particular formal employment contract is required.

Within the Medicaid Program, payment to family members for providing home care services are presumed to be a gift, rather than a wage — even if the child reported the wages to the IRS on her 1040 — unless a contract was entered into before the payments began. The written agreement must specify the services to be provided as well as the rate of payment. If the wage isn’t an amount comparable to the  prevailing market rate, the agency tends to view it as an uncompensated transfer or “gift.” The regulations don’t define just what amount of wages would be acceptable. The rule can be found at N.J.A.C. 10:71-4.10(b)6.ii. It is generally a good idea to create a detailed employment contract when setting up these kinds of arrangements. Otherwise, when a Medicaid application is filed and they do their 5-year lookback, there is a risk of a transfer  penalty being imposed for the payments that were made to the caregiver

After-the-fact payment for caregiving is treated as a gift under the Medicaid program. However, there are provisions for one type of permissible after-the-fact compensation for caregiving. The rules allow a penalty-free transfer of the residence to the child who resides with the parent and meets the criteria of “caregiver child.”  Detailed documentation should be developed to substantiate that the child meets all of the criteria, and that the parent required those services to remain in the home.

Note that a grandchild cannot be a “caregiver child” and receive the house — but they can be paid on an ongoing basis as a household employee and should enter into a written employment agreement as noted above.

For advice on structuring,  proving or appealing denials involving  in-home caregiver arrangements in connection with Medicaid eligibility, contact us at 732-382-6070