Dispute Over a Retirement Account – Part 2
In my blog post last week I told you about a recent Wall Street Journal article that caught my eye. Jeffrey’s siblings sued to recover their brother’s retirement account. In 1987 Jeffrey designated his girlfriend at the time as the beneficiary of the account. He broke up with her in 1989 but never changed the beneficiary so when he died the account custodian said they had to pay her. That’s because the retirement account is considered contract property. A will or when there is none state intestacy laws, do not control contract property if there is a beneficiary designation on file with the account custodian. Jeffrey’s siblings sued and lost but according to the WSJ article they intend to appeal. Based on my experience I would say they are very unlikely to succeed. It reminds me of a case years ago I was referred by another attorney who had tried and failed to do what Jeffrey’s siblings tried - to get a court to override the beneficiary designation. The siblings sued Proctor and Gamble, the company that Jeffrey worked for, alleging it violated a fiduciary obligation to inform him of his beneficiary designation. It isn’t clear from the article why they should have reminded him. P&G said that when it changed service
Dispute Over a Retirement Account (Part 1)
A recent Wall Street Journal article about a fight over a $1 million dollar retirement account reminded me of a similar case I had in my office 25 years ago. First about the case highlighted in the Journal. To summarize, Jeffrey, single with no children died in 2015. He had no will. The majority of his estate consisted of a retirement account that is now worth $1,000,000. That is the subject of a legal battle between his brothers and his ex-girlfriend from more than 40 years ago. The back story is that when Jeffrey first set up his retirement account at Proctor and Gamble, he designated his then girlfriend as the beneficiary on that account. In the mid 1980’s this was done by completing a paper document that he signed and submitted to the company. Jeffrey and his girlfriend split up a few years later and she went on to marry and have children. Jeffrey did not, however, ever change the beneficiary form. When he died, the ex-girlfriend was still listed as beneficiary on the original form Jeffrey had completed in 1987. The form was clear and unambiguous. It also is clear that the retirement account is considered what is called “contract property”. The retirement plan custodian has a contractual obligation with
Medicaid Redetermination – Part 7
In my blog post last week, I discussed the calculation of Mary’s elective share. That is the amount Mary is entitled to receive as a result of her husband, George’s death, which turned out to be $300,000. Obviously this is more than the $2000 in assets she is entitled to keep to maintain her Medicaid eligibility. So, must she be terminated from Medicaid? Not necessarily. That’s because there is a choice as far as which assets Mary receives. She could receive 1/2 ownership of the house, valued at $300,000. This, by itself, would satisfy the elective share in its entirety. The other 50% would pass to George and Mary’s children per George’s will. While this would leave Mary with an asset worth well more than the $2000 Medicaid asset limit, it would be co-owned with her children. If they do not wish to sell the house so she can spend down her 1/2 of the proceeds, the house becomes what Medicaid calls an “inaccessible asset”. That is one that can’t be liquidated thru no fault of the Medicaid recipient. Medicaid does not include such assets when assessing the asset limit, thus preserving Mary’s Medicaid eligibility. It should be noted that after Mary dies the home will be subject to Medicaid estate recovery, but
Medicaid Redetermination – Part 6
Picking up where I left off in my blog post last week, George died leaving his wife, Mary who is on Medicaid which has a strict asset limit of $2000. While George was alive we had him change his will to leave Mary only the minimum amount required to satisfy New Jersey’s statutory elective share, however, as I explained last week there are often assets that pass outside the will automatically to the spouse. That’s what happened with Mary. Any assets received must be spent down in a month to preserve Medicaid. That’s not easy to do since there isn’t much that Mary needs. Alternatively, the money can be turned over to the State to then remain on Medicaid. The State will seek to be reimbursed under estate recovery rules when Mary dies anyway, so this can be a good option - provided Medicaid isn’t terminated before the family realizes the money received is a problem. George had other assets as well. He owned the marital home and he had some liquid assets as part of the community spouse resource allowance that he was entitled to keep. He additionally inherited money from his brother who died after Mary was already on Medicaid. Under Medicaid rules, his receipt of this inheritance
Medicaid Redeterminations – Part 5
In my post last week, I talked about what happens when the healthy spouse dies leaving a surviving spouse who is on Medicaid. The elective share requires that a minimum amount - 1/3 of the deceased spouse’s estate less what the surviving spouse already has - must go to the deceased spouse. With a Medicaid asset limit of $2000, anything received upon the first spouse’s death will cause complications and must be worked through. Let’s look at an example. George and Mary owned their home, other real estate that George and his siblings inherited from their parents and stock and bond investments. Before Mary applied and was approved for Medicaid, we had George purchase a Medicaid annuity to preserve some of the liquid assets that exceeded the community spouse resource allowance that George was permitted to keep under Medicaid rules. The residence was exempt under the primary home exception and the real estate was inaccessible and thus not countable because the other co-owners refused to sell. But that all changed once George died. As I explained last week, the augmented estate must be determined. We must first count the estate expenses such as funeral, estate administration and legal fees and other outstanding debts such as George’s unpaid medical expenses. There
Medicaid Redeterminations – Part 4
In this week’s 4th blog post on Medicaid’s annual redetermination process I address how the death of a spouse can create issues. In the case of a married couple where only one spouse has been approved for Medicaid, the non-Medicaid or “community spouse” is entitled to keep a home if residing in it and as much as $154,120 in other countable assets (sometimes more because of exceptions to the Medicaid rules). But, what happens if the healthy spouse dies first? As I have written in the past, one thing the community spouse should do is change his/her will so as not to leave everything to the surviving spouse who is now on Medicaid. These assets will certainly cause the surviving spouse to exceed Medicaid’s strict asset limit of $2000. But there also is a New Jersey law called the elective share that entitles the surviving spouse to a minimum of 1/3 of the deceased spouse’s estate. So it isn’t as simple as cutting the Medicaid spouse out entirely. Medicaid requires that the spouse assert his or her right to the elective share. Failure to do so results in a Medicaid penalty. A right by law not exercised is no different in the eyes of Medicaid than giving the money