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What Happens When the Healthy Spouse Dies Before the Medicaid Spouse? Part 2

Last week we were discussing Judy’s problem with Medicaid.  Her dad, Joe, was about to lose his Medicaid status unless he complied with New Jersey’s elective share law, something Judy had never heard of.

I explained to Judy that many states have such a law.  It is designed to protect an unsuspecting surviving spouse who finds out after the death of a spouse that he/she has been cut out of the will.  Unless the surviving spouse waives his/her right to the elective share, that spouse is entitled, by law, to a certain portion of the deceased spouse’s estate.

In New Jersey, the surviving spouse is entitled to one-third of the deceased spouse’s “augmented estate” – the gross estate minus certain administrative expenses and debts and minus what the surviving spouse already has.

The elective share is a legal right that the surviving spouse can assert, regardless of what the will says, unless that spouse has waived the right by written agreement.  I told Judy that Medicaid regulations state that if the spouse does not exercise this right, then it is the same as if the spouse gave that money away, and of course, that transfer is subject to a Medicaid penalty.  In Joe’s case, if he doesn’t assert his right – or Judy doesn’t assert it for him as his agent under power of attorney – then he will lose his Medicaid eligibility.  How long would depend on how much he is entitled to.

Which leads us back to Melissa.  That’s because Judy doesn’t know what was left in Mary’s estate when she died.  Remember, Melissa and Judy agreed that each would take care of their own parent’s care needs and manage their finances.  So, Melissa has the information necessary to calculate what the elective share is.  In all likelihood, since Joe has less than $2000 to his name, he will be entitled some amount under the elective share.

Judy told me that she and Melissa are on good terms so she believes Melissa will be cooperative in providing this information and ultimately making the necessary payment to Joe from her mother’s estate.  If not, then Judy will need to go to court and ask a judge to enforce Joe’s right.

I told Judy that calculating the elective share can be tricky.  The New Jersey statute is a little more complicated in defining what assets are included as part of the estate and what aren’t, which expenses are deducted and which aren’t, and what assets of the surviving spouse are credited against the elective share.  In order to preserve Joe’s continued Medicaid eligibility, the New Jersey caseworker will need to agree with her numbers or Judy will need to have a New Jersey judge set that number.  Otherwise, Judy will lose Medicaid and have the nursing home looking to her to pay privately, at a cost of $11,000 per month.

Judy saw my point and asked us to help her figure it all out.  She quickly understood that this isn’t something she wants to do herself because she doesn’t have the funds to pay for care if she makes a mistake.   An elder law attorney familiar with the ins and outs of the elective share is the best person to address this directly with New Jersey Medicaid and with Melissa.  And so she hired us and we got to work preserving Joe’s Medicaid eligibility.