Medicaid Spend Down – More Involved than First Meets the Eye (Part 3)
In this week’s blog post I continue with the story about Mary’s call to our office concerning Medicaid eligibility for her mom. Mary was seeking confirmation that Mom was ready to apply and that the home she purchased for her son 15 years ago could be transferred to the special needs trust (SNT) she established 10 years ago. Mary also believed that Mom’s life insurance policy which named the trust as the death beneficiary would provide enough cash to help her brother pay the expenses of the home and other living expenses. As I explained last week, unfortunately Mary was mistaken. Her brother was never deemed disabled so any transfer of Mom’s assets to the SNT now carries a Medicaid penalty or waiting period for benefits. The more money transferred the greater the penalty, which is based on a mathematical calculation. The home, however, is not the only asset Mom has. Mom’s life insurance policy is not a term policy but rather a whole life policy. It has $150,000 of cash value which Mom has the ability to withdraw. This is a countable asset for Medicaid eligibility purposes. She can either withdraw the cash value by taking it as a loan or surrender the policy and receive the cash. Surrendering the
Medicaid Spend down – More Involved than First Meets the Eye – Part 2
In my blog post last week, I told you about a call we received from Mary concerning Medicaid. As is often the case, Mary initially disclosed what she thought were relevant questions about her mom’s potential eligibility. She was seeking confirmation that the answers she had arrived at were correct and that getting Medicaid would be relatively simple and straightforward. Unfortunately, she was mistaken. As I mentioned last week, Mary described her brother as “disabled”. He has a relatively low IQ but is able to work a minimum wage job. He is on Medicaid for health insurance and also qualifies for food stamps. Mary explained that 10 years earlier, Mom had set up a special needs trust (SNT) for him. Mary’s belief was that she could now transfer to that SNT the home he lives in which she had purchased 15 years ago. Once Mary told me that her brother was working, I knew he hadn’t been deemed disabled by Social Security and sure enough she confirmed that her parents had never pursued any diagnosis or designation. I explained that transfers to a disabled child or a trust for the benefit of a disabled child did not result in a Medicaid penalty, but her brother had not been deemed disabled. Mary
Medicaid Spend Down – More Involved Than First Meets the Eye – Part 1
In this week’s post I return to Medicaid and a call we received a few weeks ago. Mary called concerning her mother who is in a nursing facility. Her long term care policy will be exhausted in a couple of months and Mary said she has no other assets. Her reason for calling was to explore getting Mom on Medicaid. As with any potential new matter that comes to our office, in order to evaluate whether Medicaid is appropriate or even possible, we need answers to many questions that callers haven’t even considered. We started to ask those questions and from the answers we received, I quickly realized this case was more complicated than initially presented. For example, we learned that Mom had purchased a home in which her “disabled” son lives, although the son works a job that pays a bit more than minimum wage. Mom has helped him out by paying much of the housing expenses. Although Mary said Mom had only a few thousand dollars in the bank, she did mention a life insurance policy. I learned that it is a whole life policy which has accumulated a cash surrender value of $150,000. I also learned that Mom has what Mary called a lifetime annuity paying her $1500
Selling Real Estate of a Deceased Owner (Part 3)
In this third post of three I continue with the story of a call we received about an unmarried couple who owned real estate together. The woman passed away first and a year later the man died. As I explained last week, the administrator of the man’s estate found a buyer for the home fairly quickly, however, I expected that I would need to work with both real estate attorneys and the buyer’s title insurance company to get the sale to close. That’s because the title company wants to be sure there aren’t any liens for unpaid inheritance taxes before it agrees to insure the title to the property against all outside interests. While we were able to quickly file an inheritance tax return and pay the tax with respect to the 1/2 interest the woman left to the man, it takes at least a few months for the State to process the return and issue a tax waiver releasing the lien it automatically has by law on New Jersey property. The man’s return would be more involved since he left all his assets to his siblings who are Class C beneficiaries. In this case the tax would be 11% on amounts each sibling receives above
Selling Real Estate of a Deceased Owner (Part 2)
In my post last week, I told you about a call I received about an unmarried couple who owned a home together. The woman had died a year before the man. I explained that New Jersey has an inheritance tax that is payable 8 months after death. The tax is based on the relationship of the heirs to the person who died. Class A beneficiaries are exempt from the tax, which includes spouses, parents, children and grandchildren. That is why many, but not all, estates are exempt from inheritance tax. In this case, the woman who died left everything to her parents except for her share of the home which she left to her partner. That was the only asset that was subject to inheritance tax. The State, automatically by law, has a lien on New Jersey real estate and funds in New Jersey financial institutions when a person dies. The State releases its lien by issuing a tax waiver. This waiver is generated when an inheritance tax return is filed and the correct amount of tax paid. In certain instances in which no inheritance tax is due, an affidavit can be submitted to the State requesting the waiver without the requirement to file the tax return. In this case an inheritance
Selling Real Estate of a Deceased Owner (Part 1)
I have written several blog posts about problems that arise when selling the real estate of a deceased owner. Here is another one that came to our office. An unmarried couple purchased a home together, which they held as tenants in common. While they referred to each other as fiancées, they never did in fact marry before the woman died. Property held by co-owners as tenants in common means that each co-owner’s 50% share does not automatically pass to the surviving co-owner. The property interest passes according to the last will, if there is one, or according to intestacy laws if there is no will. In this case the woman had executed a will before she died. It provided that her share of the home be left to her partner but the rest of her estate she left to her parents. She did not choose her partner as the executor of her estate. Instead she chose one of her parents. As I have written about in past blog posts, New Jersey eliminated its estate tax 6 years ago but we still have an inheritance tax. The tax is based on the relationship of the heirs to the person who died. Some classes of heirs are exempt from the tax and others are