April, 2015, Friedman Law

Archive for April, 2015

My spouse has Alzheimer’s – Now what?

Posted on: April 20th, 2015 by Mark R. Friedman

An Alzheimer’s diagnosis is a difficult thing. If your husband or wife has just received one, you may be feeling overwhelming and lost, wondering what to do next.

When someone has early or mid-stage Alzheimer’s, there is a good chance they will need long term care in the near future. With most NJ nursing homes costing $10,000 / month or more, it’s very important for the spouse to take measures to protect himself / herself from long term care costs.

If your spouse has early Alzheimer’s, you should immediately make sure he has a good Power of Attorney document. That is because protecting against long term care costs often involves transferring assets, selling property or making purchases. Having a Power of Attorney means that someone else can manage your spouse’s property if he loses the mental capacity to manage it himself, which often happens as Alzheimer’s disease progresses. Once your spouse loses capacity to understand what he is signing, he can no longer create a Power of Attorney, so it’s important to do it now.

It is also usually a wise idea to update your will, to leave the smallest amount possible to your spouse. Likewise, joint property and beneficiary designations should be changed accordingly. That is because if your spouse is getting long term care, any property that goes to him when you die will be eaten up by long term care costs. Most people prefer that when they die, their property go to their children instead of their spouse’s nursing home, so it is wise to update your estate plan.

Beyond those immediate steps, after an Alzheimer’s diagnosis, it’s a good idea to consider long term care planning. That involves qualifying for Medicaid to pay for your spouse’s long term care, while preserving as much of your assets and income as possible. Long term care planning can be the difference between maintaining your lifestyle and becoming impoverished, and typically, the earlier you start planning, the more you can save.

An Alzheimer’s diagnosis can be difficult and overwhelming, but FriedmanLaw is here to make things slightly easier. Call or email us today.

How to Change your Will

Posted on: April 14th, 2015 by Mark R. Friedman

Life is unpredictable.

People get married, and divorced. Family members pass away, and new family members are born. Kids grow up. Some become wildly successful, some develop disabilities, and some become estranged.

The above are all reasons why you might want to change your existing estate plan. I’ve spent a lot of time on this website explaining why you should have a good estate plan, but how do you go about changing it?

If circumstances change and you need to change your Will to correspond, you can execute a codicil. A codicil is a legal document in which you amend your Will. You can use it to appoint someone different as executor, trustee or guardian for your children. Or change who you leave your property to when you pass away, or how your property is allocated. You can direct that property go into a trust, to protect against divorce or lawsuit costs or protect disability benefits.

If you’re making complicated changes to your Will, then it may be better to create a new Will. The execution requirements are the same for a Will or a codicil. For a healthcare directive or power of attorney, it is usually more economical to create new documents than to amend old ones. In general, it’s wise to update your documents every decade or so, since laws and family circumstances change.

You should not assume that your documents will automatically conform to changes in your life, and it’s wise to review your documents if a major life change occurs. For example, imagine that a married couple create Wills when they have no children. The Wills provide that their property will go to siblings and other relatives. If the couple later has children and doesn’t update their documents, the kids would be cut out and inherit nothing unless the documents provide otherwise.

The one exception is for divorce. An appointment of a spouse as executor, and a bequest of property left to a spouse, are both revoked on divorce per N.J.S.A. 3B:3-14. Likewise, appointment of a spouse in a healthcare directive is also revoked on divorce per NJSA 26:2H-57. However, these revocations are made only when the divorce is finalized, not when it’s started. That can lead to some awkward situations. After you’ve filed for divorce, you’d probably prefer that your spouse doesn’t retain the right to pull the plug on you.

It’s important to update your documents when major life changes occur, and FriedmanLaw is here to help.

NJ Medicaid Raises Penalty Divisor for Gifts

Posted on: April 1st, 2015 by Mark R. Friedman

NJ Medicaid issued a notice that effective today, April 1, 2015, the penalty divisor has been increased to $332.59 / day.

What is the penalty divisor? It arises when someone is seeking long term care Medicaid (i.e., Medicaid that pays for a nursing home, assisted living facility or home care aides) and has made gifts. A gift is any transfer of property to any person other than your spouse (or certain other exceptions like a disabled child) for less than fair market value. For example, if you give $50,000 in cash and securities to your children, that would be a gift. Or, if you sell your house to your son for $50,000 when the fair market value is $300,000, then you have given a $250,000 gift.

(If you can prove the transfer was for a purpose other than to qualify for Medicaid, e.g. a wedding gift, then the transfer may not be counted as a gift. But doing so is difficult.)

If you’re applying for long term care Medicaid, and you’ve made gifts in the last five years, then Medicaid calculates the total amount of your gifts (by reviewing your financial records) and assigns a transfer penalty. A transfer penalty (aka “penalty period”) is a time period of Medicaid eligibility. I.e., during the penalty period, Medicaid will not pay for your nursing home, and you must foot the bill yourself.

The transfer penalty is calculated using the penalty divisor. So under the new transfer penalty of $332.59 / day, if you have made $50,000 in gifts, then you divide 50,000 by 332.59, for a penalty period of 150 days (roughly 5 months).

Since gifts are often an integral part of Medicaid planning and asset protection, an increased penalty divisor is a very good thing for New Jerseyans who need long term care. FriedmanLaw is pleased that the increased penalty divisor will allow us to better help our clients protect their savings and their families from enormous long term care costs.