Increase in Medicaid Divisor
As I have written about frequently in this blog, when applying for Medicaid an applicant must establish by documentary evidence that he or she did not transfer assets in the 5 year period directly before the requested start date for benefits. Any transfers made for which product or service of equal value is not received - what are called transfers for less than fair value - carry a Medicaid penalty or waiting period for benefits. The more money transferred the longer the waiting period. Another number, however, also affects the Medicaid penalty. The Medicaid divisor is the number which a transfer is divided by to calculate the penalty. The divisor is what the State deems to be the average cost of nursing home level care statewide as a daily rate. A higher number results in a lower penalty. Because the cost of care does continue to climb, each spring the number is adjusted and this year is no different. Last month New Jersey announced the penalty has increased from $361.20 to $374.39. On a monthly basis this equates to $11,387, meaning every $11,387 transfer for less than fair value results in a 1 month Medicaid penalty. With the rate of inflation up near 9% one would think that the divisor increase
Estate Administration to Pursue Legal Claims – Part 3
In last week’s blog post I talked about a call from an attorney who needed help. He was handling a wrongful death claim on behalf of the children of a father who had died of injuries suffered in a car accident. I was able to get the son appointed administrator ad prosequendum which allowed him to sign the papers accepting the settlement on behalf of his father’s estate. As I explained last week, because that appointment was for a limited purpose we then had to file an application for the son to be appointed general administrator. This time the judge required a bond for the protection of the heirs and creditors. Dad had been a Medicaid recipient living in a nursing home at the time of his death so administering the estate was relatively easy, however, the one potential creditor was the State of New Jersey. Under Medicaid estate recovery laws, the State can recoup from the estate benefits it paid out during the recipient’s lifetime. No one could recall, however, receiving the estate recovery questionnaire that is mailed out after death and the attorney did not recall advising the State of the claim. Additionally, it was now six years after death. The length of time it took to
Estate Administration to Pursue Legal Claims – Part 2
In last week’s post I referred to a recent case in our office in which an administrator ad prosequendum was needed with respect to an estate whose only potential asset was a legal claim for damages resulting from a wrongful death. Not knowing how much might be recovered and there being no other estate asset, appointing an administrator for the limited purpose of pursuing the claim is the best option. So what is the process and who can be appointed administrator ad prosequendum? New Jersey court rules establish that the surrogate’s court of the county where the intestate (person who died without a will) resided or, if not a New Jersey resident, the surrogate’s court of the county where the accident resulting in the death occurred grants letters of administration ad prosequendum. The persons entitled serve are those closest in relation to the intestate. First right would be the surviving spouse or domestic partner, if any, and then the remaining heirs or some of them. In our case there was no surviving spouse or partner but there were four children. Since each would have equal right to serve, anyone not wishing to serve needs to sign a renunciation. Alternatively, an application by the person wanting to serve must
Estate Administration to Pursue Legal Claims – Part 1
We recently received a call from a personal injury attorney in need of help. The attorney had pursued a wrongful death claim on behalf of the children of their father who died in motor vehicle accident. Their father had no assets at the time of his death and in fact was a Medicaid recipient. Because, in wrongful death actions, there typically is a claim brought by the estate in addition to one by individual family members, an executor or administrator needs to be appointed to pursue - or prosecute - the claim on behalf of the estate. Dad left no will, however, so no executor could be appointed. No administrator had to this point been appointed because, as I related, there had been no need for one. Dad had no assets so there was no reason to go thru the estate administration process. While the value of the claim could not yet be determined with any certainty, the attorney believed the claim had value but needed someone to be able to sign necessary documents and make decisions about the claim on behalf of the estate. Enter someone called an administrator ad prosequendum. The term “ad prosequendum” is a Latin term meaning “for prosecution”. An administrator is appointed for the limited
Changing Distributions After Death – Part 3
In my last two posts I have been talking about the challenge of redistributing an inheritance after death. Many people assume that they are free to accept the sum bequeathed to them or not and that is absolutely true. But as I explained last week, there are tax ramifications, specifically gift tax. The annual gift tax exclusion can be a way to avoid gift tax but what if the amount to be redistributed is too large? Let’s say there are two children, A and B. A wants to give his $300,000 bequest to his brother. Using the annual gift tax exclusion, it could take 5 to 15 years to complete the gift, depending on whether A or B or both are married. (See my post last week.) Another option is for A to disclaim the assets he wants to direct to B. A disclaimer is a legal statement that A does not wish to receive the inheritance being disclaimed. A qualified disclaimer - one filed within 9 months of the death of the decedent who made the bequest - makes it so that the person disclaiming is treated as never having received it for tax purposes. It is as if that person predeceased - died before - the decedent. In this way,
Changing Distributions After Death – Part 2
In my post last week, I talked about a scenario where family members wish to change the distributions they are to receive after a loved one’s death. Because the death sets in place the wishes of the decedent (person who died) either by the will or the intestacy laws if there is no will, any changes made would be considered gifts from one beneficiary to another. In order to understand the implications of these gifts we first need to understand the gift tax laws. New Jersey does not have a gift tax, however, there is a federal gift tax. The rate, depending on the size of the gift, can be as high as 40%, although there are ways to avoid it. For example, there is an annual gift tax exclusion. In 2022 annual gifts of up to $16,000 per person can be made without triggering the need to pay gift tax or file a federal gift tax return. In the case where the donor (person making the gift) is married, a gift of $32,000 can be made without any gift tax implications. Where the gift’s recipient is also married the annual amount can be as high as $64,000, all exempt from gift tax. This may be an easy way