Don’t Forget About the Elective Share – Part 2

Last week I wrote about Jim’s call to our office.  His dad died leaving everything to Jim, including the task of taking care of his mom who had been living at home needing nursing home level care.  Jim had found a nursing facility who would take her in.  It would cost him $100,000 in care after which he would apply for Medicaid.  That was his plan – or so he thought.

I explained to him that he would have to pay more than that because of something called the elective share, which provides protection for a surviving spouse who is left nothing by his or her deceased spouse.  In New Jersey, the value of the elective share is 1/3 of the deceased spouse’s estate less what the surviving spouse already has.

The reason this is relevant is because when Jim files the Medicaid application, the State will treat any failure to assert a legal right to the elective share by his mom as if she gave that money away – what Medicaid considers a transfer for less than fair value.  It would then assess a Medicaid penalty or waiting period for benefits.

I told Jim that we needed to determine if the elective share is greater than the $100,000 he has agreed to pay for Mom’s care.  If so, then he needs to spend down more than that before being eligible for Medicaid.  How much more requires some information and calculations.

First of all we need to determine something called the augmented estate.  This takes into account the value all assets his dad had at the date of his death, including those passing by way of his will or by other means such as payable on death designations and jointly held accounts. It also includes assets he gave to others during his lifetime.  Subtracted from this are funeral and administrative expenses and other enforceable claims against the estate.

Finally, the value of assets his mom currently has are subtracted from the elective share.  In this case, Jim’s mom has nothing so there will be no offset.  Jim estimated his dad’s estate at $450,000.  Rough calculations suggest that he would need to spend $150,000 before Medicaid but we need to nail down the exact number because the State will look to calculate it to the penny as well.

There was one final important point I wanted to communicate to Jim.  Since everything was now going to be in his name and he will be paying all of his mom’s bills, he needs to document very clearly all expenses if he expects to get “credit” towards the elective share.  He can do this by asserting mom’s right to the elective share in a court proceeding which would involve legal fees and court costs.  Alternatively, we can calculate what it will be and he can document clearly the expenses coming from his personal accounts that would be applied towards his mom’s care and the satisfaction of her elective share.