Archive for the ‘Estate Administration’ Category

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Estate Planning: Beware of the Gift of Debt

Wednesday, April 14th, 2010

Fredrick P. Niemann, Esq., NJ Estate Administration Attorney

If you inherit property, of course you should be grateful and count your blessings. Still, consider the possibility that the gift may come with a big string attached – a debt linked to the property, such as is particularly common with real estate or a car. In that event, the question arises as to whether the debt must be satisfied from the particular asset or from the decedent’s estate more generally. How this question is answered can cause a big swing in the respective gift amounts for beneficiaries of an estate.

Historically, the law presumed that the debt was not to be paid from the property that was connected to it. The reasoning was that a true gift should not come laden with such a burden. Over time, as taking on debt became commonplace, this thinking changed and statutes flipped the conventional assumption. Increasingly, these laws start from the premise that the property left to someone includes the debt on the property, unless the decedent in his or her will clearly indicated a different intent. That is where careful estate planning, with professional guidance, comes in.

It is best to leave no doubt for the ordinary lay reader of a will. A general directive in the will to pay all debts of the testator is too nebulous. Instead, if the intent is not to keep the asset joined to the debt, language something like this should be used in a will: “If [the specific asset] is subject to a mortgage, security interest, or other lien, I direct that my executor pay the debt from other property of my estate which is not given to a specific person or entity.”

This scenario was played out recently in a case in which a farmer left to his (favored?) son three different farms, each of which was encumbered by debt. To his other son he left the residue of the estate. When the father died, the executor used part of the estate proceeds to pay off the loans to the farms, so that the first son would receive them debt-free. Not surprisingly, the second son, whose inheritance was thereby diminished, brought the matter to court.

The second son prevailed, forcing payment of the debts for the farms to come from the farms themselves. The father’s will directed in a general way that debts were to be paid from the estate. However, under the relevant state statute, that was not a sufficiently explicit indication of intent to satisfy the debts on the farms from the residu¬ary estate. In other words, the will had not clearly shown an intent that the first son was to receive the farms debt-free. As a result, the first son got the three farms, but he, not the second son, also got the responsibility for paying off the attached encumbrances, which totaled almost a quarter of a million dollars.

For further information and advice in any estate matter, do not hesitate to contact me at 888-800-7442, or info@fnlawyerinnj.com.

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Distribution from Self-Settled Special Needs Trusts Relating to Medical Expenses

Friday, April 9th, 2010

Fredrick P. Niemann, Esq., a NJ Special Needs Trust Attorney

One of the most pressing needs for disabled beneficiaries is medical care.

Medical Insurance
It is crucial that the disabled beneficiary obtain some form of medical insurance. Options include the following:

  • Private Medical Insurance. Typically, the only source of private medical insurance at regular rates is through the parent’s coverage with the parent’s employer. Parents of such child must make every effort not to lose their jobs.
  • COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1996 (COBRA) allows former employees and their dependents to continue the employer’s coverage for a limited period of time, commonly 18 months. However, if the employee became disabled within two months of the qualifying event causing him to lose medical insurance coverage, COBRA coverage may be extended for 29 months. If the former employee died, divorced, or became entitled to Medicare, then the employee’s dependents are eligible for 36 months of coverage.
  • State-Mandated High-Risk Pools. Many states have high-risk pools to cover persons who are uninsurable in the private market. This coverage often tends to be very expensive.
  • Medicare. Medicare is only available to persons under 65 if they are disabled and have 20 quarters of coverage. If they receive SSD, then two years after the determination of disability they are entitled to Medicare. Persons receiving Medicare should obtain a Medicare supplement policy. There is usually a very limited open enrollment period to obtain this coverage after which it becomes impossible to obtain because of pre-existing conditions.
  • Medicaid. Persons receiving SSI also receive Medicaid. In non-SSI states having a Medically Needy program, persons qualify for Medicaid by spending down their income if income is above a certain amount. Some states have income caps. Other ways of obtaining Medicaid are through state Medicaid waiver programs, including various Kid Care programs available in many states. Eligibility rules vary. A Katie Beckett waiver program is very desirable, because the income and assets of the parent are not deemed to the children. Some states do not call their programs Katie Beckett, which is a specific categorically eligible group of Medicaid recipients, but the effect is the same because those state identify groups of children with disabilities and provide for Medicaid eligibility so the waiver services are available. Slots tend to be extremely limited.

Non-Covered Medical Expenses
Typically, Medicaid pays for 100 percent of covered expenses. However, very often, psychological services, certain types of testing and some special therapies are not covered. It is appropriate for a trustee to pay for these non-covered services. It is also appropriate for a trustee to pay for dental care, prescriptions, and podiatrist care.

Provider Non-Acceptance
Some providers do not accept Medicaid, because of the low reimbursement rate. It is difficult to find a dentist participating in the program. Some persons with disabilities choose physicians who do not accept Medicaid. It is appropriate for a special needs trust to pay for services from those physicians.

Out-of-Pocket
If the person with a disability receives Medicare, rather than Medicaid, there may be co-payments, deductibles and payments for services that Medicare does not cover. It is appropriate to pay for those costs from a special needs trust.

If you have any questions concerning Medicaid or a trust for a disabled or handicapped child, contact Fredrick P. Niemann, Esq. at 888-800-7442, or info@fnlawyerinnj.com.  He is happy to answer your inquiries.

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Tips for Preventing, Detecting, and Reporting Financial Abuse of the Elderly

Wednesday, December 23rd, 2009

Fredrick P. Niemann, Esq., NJ Elder Law Attorney

As the economy worsens, incidences of elder financial abuse are reportedly on the rise. The elderly are particularly vulnerable to scams or to financial abuse by family members in need of money.

A recent study found that up to one million older Americans may be targeted yearly. Family members and caregivers are the culprits in 55 percent of cases, although financial losses are higher with investment fraud scams.

While it is impossible to guarantee that an elderly loved one is not the victim of financial abuse, there are some steps you can take to reduce the chances. One option is to have more than one family member involved in caring for the loved one. You can also encourage the elder to get involved in community activities to ensure he or she has a wide range of support. Using direct deposit as much as possible is also helpful. And of course you should always screen caregivers carefully and verify references.

Financial abuse can be very difficult to detect. The following are some signs that a loved one may be the victim of this kind of abuse:

  • The disappearance of valuable objects
  • Withdrawals of large amounts of money, checks made out to cash, or low bank balances
  •  A new “best friend” and isolation from other friends and family
  • Large credit card transactions
  •  Signatures on checks look different
  •  A name added to a bank account or newly formed joint accounts
  •  Indications of fear of caregivers

If you suspect someone of being financially abused, there are several actions you can take:

  • Make a report by calling your local or County Adult Protective Services and/or the NJ Office of the Ombudsman for the Elderly. File a police report if you believe the facts support a crime.
  • Explore legal options with a qualified attorney.  In New Jersey, the Chancery Court is available to address alleged legal abuse. The court can intervene if someone in the family is misusing a power of attorney or their role as guardian or conservator.
  • Contact advocacy organizations. The National Center on Elder Abuse offers guidance on how to investigate and seek justice for elder abuse. State laws vary, but some have people available to deal with the situation and may be able to get restitution for breach of fiduciary duties.
  • Try to get a temporary restraining order from a court while building your case.  Again, speak to a qualified elder law attorney.

If you have any questions regarding an elder law or estate planning matter, contact Fredrick P. Niemann, Esq. at (888) 800-7442, or info@fnlawyerinnj.com.  He is happy to answer your inquiries.

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Do You Have the Right Fiduciary for Your Estate?

Friday, July 10th, 2009

Warning: Your Decision Does Matter

Fredrick P. Niemann, Esq., NJ Estate Plan Attorney

When creating an estate plan, especially in your will and/or trust, an important decision is who to name as your fiduciary. A fiduciary is a fancy legal term for the person who will take care of your property for you if you are unable to do it yourself, such as the executor of an estate, the trustee of a trust, or an attorney-in-fact under a power of attorney. Your first instinct might be to name one of your children as a fiduciary, but if you want to avoid conflict among your children, this might not be the best option.

When naming a fiduciary, it is important to be able to trust the individual, which is why people often name family members as fiduciaries. However problems can arise when a parent with two or more children names one child as a fiduciary. According to Fredrick P. Niemann, an attorney from Freehold, New Jersey, who spoke on the issue of family harmony at a recent estate planning seminar, a child is often not the best fiduciary for several reasons:

  • It is hard for a child to be completely objective. 
  • Children often disagree over many things, including how long the estate should take to complete, the selling of assets, and the division of personal property.
  • Children often don’t communicate with each other well.

An alternative is to hire a professional fiduciary. A professional fiduciary can be a bank or investment firm with trust administration experience with trust powers, a certified public accountant, or a trust company. A professional fiduciary will charge a fee, but the fee should be explained ahead of time. In addition, because a professional is experienced in managing money and property, your assets are more likely to increase under this person’s or institution’s guidance.

To ensure that your family has some input, you can include a provision that allows one or more family members to discharge the fiduciary if they feel the professional is not doing a good job. This will allow your family to make sure the fiduciary is performing properly without having the burden of acting as fiduciary.

For further information and advice in any estate planning matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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What Happens If You Die Without a Will?

Friday, May 1st, 2009

Fredrick P. Niemann, Esq., a NJ Estate Planning Attorney

We all know we are supposed to do estate planning, but not all of us get around to it.  So what happens if you don’t have a will when you die in New Jersey? Your estate will be distributed according to New Jersey state laws, which may or may not be the way you want it to be distributed.

Dying without a will is called dying “intestate”. New Jersey has laws that determine what will happen to your estate if you don’t have a will. If you are married, New Jersey law will award a portion of your estate to your spouse, with the rest divided among your children.  If you don’t have children, then your estate will be divided among other living relatives such as your parents or siblings. If you are single, New Jersey provides that your estate will go to your children or to other living relatives if you don’t have children. If you have absolutely no living relatives, then your estate will go to the state.  This is called escheating to the state of New Jersey.

Note that any jointly held assets, such as bank accounts or real estate, will go directly to the co-owner. In addition any life insurance policies or retirement accounts will go directly to the beneficiary designated on the account. And if you have a trust, any assets in the trust will go to the beneficiary designated in the trust.

One purpose of a will is to name a guardian for your young children; if you do not have a will, the court will determine who will act as guardian of your children. The court will also appoint the person who will administer your estate. In addition, if you are unmarried but have an unregistered partner, your partner will not inherit anything from your estate without a will naming him or her as a beneficiary.

The best way to ensure your estate is distributed the way you want it is to plan your estate with a will and/or a trust attorney.

For further information and advice on NJ estate planning laws, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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National Report Says States Have Ability to Curb Power of Attorney (POA) Abuse

Friday, April 17th, 2009

Fredrick P. Niemann, Esq., a Power of Attorney Lawyer

The misuse of powers of attorney to exploit the elderly appears to be on the rise, but a new AARP report says that states can improve protections for older people by adopting a model law that addresses this type of abuse.

For most people, the power of attorney is the most important estate planning instrument — even more useful than a will. A power of attorney (POA) allows an individual to name a trusted person — their agent — to make financial decisions for them if they ever become incapacitated.

But while a POA avoids the costly and time-consuming process of having a court appoint a guardian or conservator, it also confers a great deal of authority on the agent. This is why advocates for the elderly often call the POA a “license to steal.” Increasingly, it seems, dishonest agents have been taking advantage of this license. AARP says that adult protective services and criminal justice professionals are reporting “an explosion” of financial exploitation cases of this type against the elderly.

Powers of attorney are regulated by state law and most states lack adequate safeguards, AARP contends; not New Jersey however. “New Jersey has strong fiduciary laws that are readily enforceable by the courts” says Fredrick P. Niemann, an elder law attorney in Freehold, Monmouth County, New Jersey.  New Jersey has laws on Powers of Attorney to offer help to protect people who execute POAs and discourage POA abuse. “There are stringent requirements for agents to exercise certain powers, as well as provisions making malfeasant agents liable for damages, attorney’s fees and costs”, says Niemann.

The AARP report, “Power of Attorney Abuse: What States Can Do About It,” compiled by the American Bar Association Commission on Law and Aging under contract to AARP.

For further information and advice on Powers of Attorney, do not hesitate to contact Fredrick P. Niemann at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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IRS Clarifies Recent Law Waiving Account Distribution Rules for 2009

Friday, March 27th, 2009

Fredrick P. Niemann, Esq., an Elder Law Attorney

The Internal Revenue Service (IRS) has issued guidance to financial institutions clarifying the new law that allows seniors to avoid making required withdrawals from depleted retirement accounts in 2009.

Taxpayers over 70 ½ years old generally must begin withdrawing a certain percentage of the balance of retirement accounts like IRAs and 401(k)s each year or pay, in addition to income tax, a 50 percent excise tax on the amount that should have been withdrawn but was not. While tax payers who turned 70 ½ in 2008, can delay the 2008 distribution until April 1, 2009, the guidance makes clear that those seniors must still take their withdrawals because the new law only suspends required withdrawals for the 2009 tax year.

Some beneficiaries must deplete an IRA by the fifth anniversary of the IRA owner’s death. The guidance explains that if a beneficiary must take required minimum distributions under the five-year rule and the fifth year is 2009, the beneficiary has an extra year (until 2010) to liquidate the account.

Finally, according the guidance, the IRA trustee is not required to give the IRA owner a notice detailing the required withdrawal for 2009. Instead, the trustee may, if it wishes, send a statement that the required distribution is zero or a statement showing what the required distribution would have been and an explanation of the waiver.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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The Benefits of Fixed Annuities

Friday, March 27th, 2009

Fredrick P. Niemann, Esq., an Asset Protection Attorney

If you are looking for a steady stream of income in retirement, an immediate fixed annuity may be the answer. An immediate fixed annuity isn’t flashy and doesn’t promise big gains, but with the stock market so uncertain, sometimes steady is better.

When you purchase an immediate fixed annuity you give a lump sum to an insurance company. The insurance company then pays you a set amount each month for the rest of your life. There are several different types of annuities, but the immediate fixed annuity has two key elements. The annuity is immediate — meaning the insurance company starts making payments right away. This is in contrast to a deferred annuity, which begins making payments at a later date. In addition, the annuity is fixed. Unlike a variable annuity, which can fluctuate with the stock market, the amount you get with a fixed annuity stays the same each month. It is sort of like having your own personal pension plan.

The benefit of an immediate fixed annuity is a steady stream of income for life. This can be helpful if payments from Social Security and your pension or 401(k) don’t cover your needs. Immediate annuities can also be used to make up missed income if you retire early.

Immediate annuities are also useful for Medicaid planning. Purchasing an immediate annuity is a way for people with assets in excess of Medicaid’s limits to turn the assets into an income stream while avoiding a penalty for transferring the assets.

Immediate fixed annuities do have some downsides and are not for everyone. First, you must have accumulated some savings to use for the annuity premium payment. Another issue is that payments are not adjusted for inflation, so over time the money you receive is not worth as much. In addition, the money in the annuity is not liquid, so if you need a large sum of money for a medical or other emergency, it will not be available. Because of the lack of liquidity, experts advise putting not more than 20 to 30 percent of your assets into a fixed annuity.

If you are planning on purchasing an immediate fixed annuity, be wary of sales agents who try to convince you to purchase a variable annuity. Many companies have come under scrutiny for unscrupulous sales tactics with regard to annuities. In addition, because the payments are meant to last a lifetime, you want to be sure the insurance company you pick will still be around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard & Poor’s, or Weiss.

For further information and advice, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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Supreme Court Says Deceased Employee’s Ex-Wife Can Get His Pension Benefits

Friday, March 13th, 2009

Fredrick P. Niemann, Esq., a Probate and Estate Administration Attorney

A new Supreme Court decision illustrates the importance of making sure your beneficiary designations are up-to-date. The Court has unanimously ruled that an employer must distribute a deceased employee’s retirement benefits to his ex-wife even though she had renounced the benefits in their divorce. Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan (U.S., No. 07-636, Jan. 26, 2009).

William Kennedy worked for DuPont Co. and had a retirement plan through the company. His wife, Liv, was the designated beneficiary of the plan. In 1994, William and Liv divorced and the divorce decree stated that Liv waived the right to any of William’s retirement plans. However, William never changed the beneficiary designation on his retirement plan. When William died, his daughter, who was the executor of his estate, asked DuPont to distribute the plan to the estate. But DuPont relied on William’s beneficiary designation and instead distributed the plan benefits, totaling $402,000, to Liv.

William’s estate sued DuPont under the Employee Retirement Income Security Act (ERISA), claiming that in signing the divorce decree, Liv had voluntarily relinquished, or waived, her right to the plan benefits. A U.S. district court ordered DuPont to pay the value of the plan to the estate. Liv appealed and the U.S. Court of Appeals for the Fifth Circuit reversed the district court’s ruling, holding that Liv had not waived her right to the plan benefits. DuPont then appealed.

In an opinion written by Justice David Souter, the U.S. Supreme Court agrees with the Court of Appeals and holds that according to ERISA, DuPont had to follow William’s instructions on the original document and distribute the retirement benefits to Liv. The Court notes that William had an easy way to change the beneficiary designation, but he chose not to.

If you have any questions, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

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The Risk of Going Through Medicaid Application Process Alone

Friday, March 13th, 2009

Fredrick P. Niemann, Esq., NJ Medicaid Application Attorney

When money is running out and the family is faced with the need to apply for Medicaid to pay for long term care the question becomes “should we do this ourselves or should we hire an elder law attorney to help?”  Sometimes the hospital or the nursing home tells the family they will qualify without too much difficulty.  Many places strongly encourage families to hire an experienced Medicaid attorney.  So they try to do it themselves.

The pitfalls of going it alone are many and varied, especially since the latest round of Medicaid changes effective February, 2006 made the laws and regulations in this area much more complicated.  Timing is critical.  By that, I mean to say, that when you spend down assets and what assets you have at a certain point in time will have an impact on qualifying for benefits.  Let me illustrate by way of example.

John and Mary were in their 80’s and living in their home, which they owned.  They had other countable assets of approximately $50,000.  John and Mary had done no planning for their long term care needs.  John became ill in October, was admitted to the hospital and then to a nursing home for rehabilitative services.  His condition was such, that he could not go home and needed to remain in the nursing home on a long term basis, at a private pay cost of $10,000 per month.

Mary was told by various personnel at the hospital and the nursing home that based on their level of assets “John would qualify for Medicaid” in January and they arranged for her to meet with a Medicaid caseworker to make an application for benefits.  Being stressed out by the reality that John would not go home and uncomfortable with the complicated process she did not understand that for John to qualify she would have to spend down a portion of their assets to get below a certain dollar amount.  In her case that number was $27,000.  The caseworker explained this to her at the interview but, quite frankly, she was receiving so much information that she really didn’t fully understand how important that was.

She waited for medical and nursing home bills to come in.  She figured she owed the money so it was as good as spent.  In other words, in her mind she didn’t have $50,000.  They owed $28,000 so she had $22,000 left.  Not true under Medicaid rules.  Until she wrote those checks, John and Mary were “over-resourced”, Medicaid’s term for having too much money to qualify for benefits.  If you are over-resourced by even $1.00 you won’t get Medicaid for that month.  You will never get Medicaid for that month.

Had she paid those bills right away John would have qualified for benefits in January.  Instead, she didn’t write those checks until June, meaning John didn’t qualify for Medicaid until July.  Great, so Medicaid picked up the nursing home bill in July.  There was one small problem.  Who was going to pay the nursing home bill for January through June?  The answer was John and Mary, and at the private pay rate of $10,000 per month that was $60,000.  The shame is that this didn’t need to happen.

This example illustrates the pitfalls of going it alone.  The rules are quite complicated and timing is critical.  You don’t want to be left with a huge nursing home bill which you can’t pay.  The nursing home doesn’t really want to be in the position of suing their residents.  Having a knowledgeable elder law attorney representing you can save huge dollars and huge amounts of stress.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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