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Articles Posted in Elder Law

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The spousal impoverishment provisions of the Medicare Catastrophic Coverage Coverage Act of 1988 changed the requirements for eligibility for Medicaid when only one spouse needs to enter a nursing home and is expected to stay in the nursing home for at least 30 days. The law’s purpose is to preserve some of the assets of the other spouse (the “at-home” spouse). The at-home spouse is permitted to retain one-half of all “countable assets” subject to a minimum of $22,728 and a maximum of $113,640 (this is called the “Community Spouse Resource Allowance”).

The couples’ assets must be analyzed prior to applying for Medicaid. This includes all assets owned by the spouses jointly or individually. The first thing to assess is which assets are countable assets under the Medicaid laws and regulations. The following assets are exempt (not countable): the marital home, personal belongings and household goods, one car or truck, income producing real estate, burial plots and related items, irrevocable prepaid funeral contracts, the value of life insurance policies where the aggregate face value of the policies is less than $1,500 (if the aggregate face value of the policies exceeds $1,500, then the cash value of the policies is countable). All other assets are countable. Examples of countable assets are: cash, savings accounts, checking accounts, certificates of deposit, U.S. Savings Bonds, IRAs, 401(k)s, 403(b)s, nursing home accounts, prepaid funeral accounts which can be cancelled, some trusts, additional cars (in excess of one), other real estate, boats, recreational vehicles, stocks, bonds, mutual funds, and mortgages held on real estate sold. The at-home spouse may retain the exempt assets and one-half of the countable assets up to $113,640. The remainder of the assets must be spent until only $2,000.00 remains.
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A qualified personal residence trust (QPRT) offers an opportunity for homeowners to minimize or avoid federal and New Jersey estate taxes. A QPRT allows a homeowner to transfer ownership of a primary or vacation home to a “grantor trust,” while keeping the right to live there for a specified period of time. When that specified time ends, ownership passes outright to the homeowner’s children or whoever is named as the remainder beneficiaries.

When you transfer your home into a QPRT, you make a gift to the beneficiaries which is subject to gift tax. The value of that taxable gift is not the full fair market value of the home, as it would be with an outright transfer. The value is discounted. In the current real estate market values are quite low, adding to the benefit of the QPRT. The gift is also discounted to reflect that you have retained an interest (the right to live in the home for the specified term). Internal Revenue Service tables and current interest rates are used to determine the amount of the discount. The federal gift tax exemption is currently $5,120,000.00 and you can utilize a portion of that exemption and pay no gift tax. As New Jersey does not have a gift tax, you can transfer the home without incurring any New Jersey gift tax.
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An estate plan carries out a person’s wishes at the time of their death and appoints people to make decisions during life.

An estate plan commonly consists of three main documents:
• Last will and testament
• Durable power of attorney • Living will and health care proxy (medical power of attorney)

Last Will and Testament. The fundamental document is the last will and testament. The will takes effect upon death. The will must meet the formal requirements under New Jersey law in order to be effective in New Jersey
The will designates people and their roles:
• Beneficiaries – recipients of the decedent’s assets;
• Executors – the persons who will probate the Will, collect the estate assets
and distribute the estate assets to the beneficiaries;
• Trustees – the persons who will manage the assets placed in a Trust usually
for the benefit of either the surviving spouse or the children or both;
• Guardians – the persons who will care for minor children until they reach the
age of majority (which is age 18 in New Jersey).

Durable Power of Attorney. The power of attorney is in effect when a person is alive; it becomes effective when it is signed. When a power of attorney is “durable”, it remains in effect even if the person is incapacitated. The durable power of attorney authorizes the people selected to handle your financial matters. Common tasks include banking, including writing checks and paying bills, real estate, trading investments, communicating with social security, pension benefits departments, Medicaid/Medicare, and the IRS, hiring accountants, attorneys, and financial advisors, and any other related financial need.
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