Estate Administration – Do It Yourself or Not (Part 2)
In my blog post last week, I began a discussion about what role an attorney can play in the estate administration process. More specifically, how much involvement we have in any case depends on the complexity of the matter and how much our clients want to take on themselves. As I explained last week, the first step in the process is for an estate representative to be appointed to deal with assets and debts of the decedent. When a will exists which designates an executor, the appointment process, while a bit more complicated now than was the case before Covid, is still simpler than when no will exists. In that case, New Jersey law lists the order of priority of person entitled to serve as estate representative based on family relationship to the decedent (the person who died). The first in line to serve (called an administrator when there is no will) is the decedent’s spouse or domestic partner. If none is willing to serve, next in line are the remaining heirs. That would be direct descendants first if there are any (ie. children, grandchildren). When there is more than one child, each has equal right to serve. Any of them can decline to serve by signing a renunciation,
Estate Administration – Do It Yourself or Not?
A common question I am asked when talking to someone about hiring us to help with estate administration after a loved one dies is whether they need the assistance of an attorney or not. My general answer is that it depends on the specifics of the particular matter as well as on how much the estate representative wants to handle him or herself. More specifically, with the exception of certain tasks which cannot be delegated, as attorneys we can handle as much or as little of the estate administration process as a client desires. Only the estate representative , for example (ie. Executor or Administrator), can open an estate bank account, sign checks drawn against this account and close out and withdraw funds from accounts in the name of the decedent (person who died). For most tasks required to administer an estate, however, the estate representative can either take a “do it yourself” approach or seek professional assistance. It really depends on the level of complexity. Let’s start from with the beginning of the estate administration process. If I pass away owning assets and I have bills to pay, the first question is “who can access my accounts?” A second question is what happens to my assets, meaning
2025 Estate Tax Changes
In my last blog post of 2024, I discuss changes to estate and gift taxes for 2025. As with Social Security and the Medicaid and VA programs which I have already detailed here in past weeks, inflation adjustments have changed some numbers applicable to estate and gift taxes. Estate tax is due on certain individual’s estates after they die. While New Jersey does not currently have an estate tax (we do still have an inheritance tax), federal estate tax still exists for estates over a certain size. For persons dying in 2025, only estates over $13,990,000 are subject to federal estate tax up from $13,610,000 in 2024. I should note that the current estate tax law is set to expire at the end of this year. Unless the incoming Congress and president agree to extend the law, when it “sunsets”, the old law will come back with the exemption cut in half. While many believe the law will, in fact, be extended, we should know for certain sometime before the end of next year. The annual gift tax exemption is also set to be bumped up. In 2024 one could gift up to $18,000 per person per year without either paying gift taxes or using a part of the
2025 VA Aid and Attendance Numbers
In this week’s post I will review the updated numbers for 2025 for the VA program that provides a benefit to wartime veterans and their spouses. Known as the VA Aid and Attendance program, this benefit provides a special pension to eligible applicants who need long term care. The maximum pension amount is tied to the same cost of living adjustment as Social Security, which for 2025 is 2.5 %. For a single veteran with no dependents the maximum pension one can receive goes up to $2358 per month. For a married veteran the maximum for 2024 will be $2795. For a widowed spouse who needs care the 2024 maximum will be $1515 per month. The Aid and Attendance program is a needs based benefit. This means that to be eligible one must meet a financial test. Different than Medicaid, the VA uses a net worth test. It calculates the applicant’s (in the case of a married couple both spouse’s) annual income and adds that to the countable assets. This is known as the net worth. For 2025 the net worth must be no more than $159,240 to qualify for this benefit. Existing VA A&A recipients should have received a letter from the VA informing them of the new amount they
2025 Medicaid Numbers
In a blog post in October, I updated you on some of the new Social Security and Medicare numbers for 2025. The recently announced cost of living adjustment (COLA) of 2.5% follows a 2024 increase of 3.2%. Many other federal programs are tied to the Social Security COLA. These include Medicaid and the VA Aid and Attendance programs. This week we will review the 2024 Medicaid numbers. Medicaid’s programs that cover long term care have a strict income cap or limit. For 2024 that number is $2901 per month. Anyone with more than $2901 per month of gross income (before taxes and Medicare and health insurance premiums are deducted) must use a Qualified Income Trust in order to qualify for Medicaid. Medicaid recipients must also have less than $2000 of countable assets. A home is an exempt asset up to a certain limit as long as the applicant is living in it. In 2025 the limit is $1,097,000 of equity. Anything above that amount is countable. For a married couple where at least one of the spouses is living in the home there remains no limit. In other words, the home is exempt in that case no matter the value. In the case of a married couple where only one spouse is applying for Medicaid,
Real Estate and Medicaid (Part 3)
In this third post of three, I discuss the impediment to qualifying for Medicaid when an applicant owns two homes. To review, only the primary residence is an exempt asset as long as the applicant or spouse is living in it. The second home is countable towards Medicaid’s asset limit. Selling the home and spending down the proceeds is obviously one option, however, if the desire is to keep that home in the family there are other options. Last week I explained that the equity from the second home can be converted to cash by borrowing against it and taking a mortgage. The cash then must be spent down. In the case of a married couple, the non-Medicaid spouse can then purchase a Medicaid compliant annuity which converts this cash to income under Medicaid rules. The spouse then receives monthly payments from the annuity that can be used to make the mortgage payments. In the case of a single applicant it is a bit more complicated but some part of the cash would be transferred and the rest used to purchase the annuity. In that case, the transferred cash would be used to pay the mortgage. This week I discuss a second option. This solution involves selling the second home or a