When the State Decides Who Gets Your Assets
Last week we were discussing whether and under what circumstance a person who is mentally impaired can execute a will. So what happens if a person dies without a will? How are assets passed in that case? New Jersey has a law that predetermines how assets are passed in cases where there is no will, what is known as an intestacy statute. I should first point out, however, that there are other ways to transfer assets at death without a will. Jointly held property with rights of survivorship is one way. When one co-owner dies the surviving co-owner(s) take ownership of the deceased co-owner’s share automatically by law. Another way to transfer property at death is to designate a payable on death or transfer on death beneficiary. But, any assets which are not co-owned and have no beneficiary designations will pass by way of the intestacy laws, provided there is no will. So, how do the assets get distributed? First, we must determine if there is a spouse. If the decedent (deceased person) has no descendants (ie. children, grandchildren etc.) or parents alive, the spouse receives the entire estate. The spouse also receives the entire estate if the decedent’s
Can a Mentally Impaired Person Execute a Will?
Mom has been diagnosed with dementia. She doesn’t have any estate planning documents, such as a will, power of attorney or health care directive. I am often asked, “Can Mom still execute these documents? What level of capacity is needed?” The legal capacity needed to execute a will is actually a pretty low threshold. A diagnosis of dementia or Alzheimer’s does not by itself mean the individual lacks capacity to execute documents. Neither is there a requirement that a doctor make that determination. The person must simply understand what it is they are signing and who they are designating as their fiduciaries (ie. executor, trustee etc.) and their heirs. Capacity can also “come and go”. Mom may have good days and bad days as her dementia progresses. If she is having a “bad day”, one in which she may be agitated and confused, maybe unsure of who her children are, that would not be a day in which she would be able to execute documents. On the other hand, a day or week later, when she is having a “good day” and is capable of understanding and expressing her desires, Mom has the requisite capacity to execute documents. But,
Some Long Term Care Insurance Options You Probably Never Heard Of (Part 2)
Last week I told you about Jim and Judy who had passed on the opportunity to buy long term care insurance years ago and are now too old to get it. I told Jim that there are some options available to him and Judy, even now while in their late 70’s. Jim told me that he had about $300,000 in CDs and savings accounts, another $350,000 in mutual funds and annuities and $200,000 in IRAs for each of them. In total they had just over $1,000,000, plus their home worth about $400,000, a nice nest egg but certainly not enough to pay a $125,000 long term care expense if either need 24/7 care. And if both need that type of care, a quarter of a million dollars in long term care would seriously deplete that sum, eliminating their ability to continue to help their son. So, what options do they really have? First, I told Jim that he and Judy could purchase a type of annuity which could provide them with 2 or 3 times the amount of the initial premium for long term care. For example, if Jim put $75,000 into the product he would have available to
Some Long Term Care Insurance Options You Probably Never Heard Of
Jim and Judy called because they wanted to make some changes to their wills. In their late 70’s but still pretty healthy, they have a son who is struggling financially with 2 children in college and another with special needs. They wanted to provide for their grandchildren and also wished to make some other modifications to their estate plan. As I always do, after we addressed their needs, I turned to the topic of long term care. “How do you plan to pay for care should either of you need it,” I asked. Jim proceeded to tell me about how they had looked at long term care insurance a number of years ago and opted not to buy it. As he was telling me this, he sounded a little bit regretful. “I don’t know,” he said. “Maybe we made the wrong choice, but it’s too late now. We’ll have to just pay for it ourselves as it comes. I have invested our assets and done pretty well. We have approximately $1,500,000 so I guess we’ll have to draw down on that money if and when we need care. I then told Jim that it might not be too late
When Doing it Yourself (Medicaid) Can Only Take You So Far (Part 2)
Last week I was telling you about Joe’s call. His mother, who was on Medicaid, received notice of an inheritance of $75,000. Joe wanted to figure out a way to keep that money since he and his brother had given Mom money to pay some of her medical expenses that she never repaid. I told Joe I didn’t think that was possible. The reason is because he didn’t document that the money was a loan. He said that he never could have foreseen that his mother could ever pay back the money. Unfortunately, from a Medicaid perspective, the State of New Jersey presumes that the money given to Mom is either income to support her or a gift. Remember, last week I told you that when Joe applied for Medicaid, the caseworker tried to peg it as income. Joe successfully fought that. However, he didn’t see the gift vs. loan issue coming. Not knowing the Medicaid rules as I do, how could he have? Without a written agreement at the time he gave Mom the money, the presumption is that there was never an intention for Mom to pay it back, making any attempt now to do so a
When Doing it Yourself (Medicaid) Can Take You Only So Far
We got a call the other day from Joe. He had prepared and filed his mother’s Medicaid application himself. From what he told us, it sounded like he did a great job. He had hit a bit of a snag because Joe and his brother had been helping Mom out with her expenses. At first, the Medicaid caseworker treated the transfers into Mom’s account as additional income to her. However, Joe was successfully able to prove that the money was given to Mom to help pay some of her medical expenses. It wasn’t support and shouldn’t affect her Medicaid eligibility. He was successful and Medicaid was approved. So why was he calling? Because his mother had inherited $75,000 from a family member. The first thing he wanted to know was whether there was any way they could keep the money. His thinking was that it would be a reimbursement by Mom to Joe and his brother. I told him that unfortunately I didn’t think so. However, there is a lesson here. Had Joe consulted with us before he applied for Medicaid I would have taken steps to make sure that he could recoup some of