SSA Clarifies Its Position on Court Established (d)(4)(A) Trusts

After much criticism, the SSA has issued an Administrative Message clarifying its policy regarding (d)(4)(A) Special Needs Trusts created by court order.

Recently, some SSA offices have been refusing to approve court-established (d)(4)(A) trusts because they were not created by a court “order.”

The SSA has now issued an Administrative Message. The message states that “[i] in the case of a special needs trust established through the actions of the court, the creation of the trust must be required by a court order. The special needs trust exception can be met when courts approve petitions and establish trusts by court order.

When the court issues an order approving the creation of the trust, it will meet the requirements of the regulation. In the second example, a judge orders the creation of a trust to hold a settlement, and the trust document lists the settlement as the trust’s original corpus. This trust also passes muster with the SSA. The SSA gives a negative example that when a court approves a trust that has already been created ahead of time, or when a court amends a defective trust with a nunc pro tunc order to make the amendment retroactive to the date the trust was originally created, the trusts will not qualify for the special needs trust exception. As often the case, I believe this position is a bunch of legal %$#%^*, just another example of legalize trumping reasonableness and fairness.

If you are contemplating the creation of a special needs trust especially as a lawyer with a personal injury case you should call to speak with me before you accept any funds from settlement or verdict.

To discuss your NJ Special Needs Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

This Just In From the State: 2015-2016 Community Spousal Maintenance, Shelter and Utility Allowance Adjustments (MMNA & CSRA Allowance)

Effective July 1, 2015 the new base income allowance for a community spouse will increase from $1,966.25 to $1,991.25. The new standard for determining the excess shelter allowance for the community spouse increases from $589.88 to $597.38. Therefore, in computing the community spouse allowance, the community spouse’s shelter costs in excess of $597.38 shall be added to the base allowance of $1,991.25. If the community spouse is paying directly for their utilities, the utility allowance is also added as a shelter expense. The utility amount has been increased effective October 1, 2014 from $454.00 per month to $491.00 per month. The community spouse’s own gross income is subtracted from the overall allowance to determine the amount that may be deducted from the institutionalized spouse’s income prior to applying that income to their cost share of institutional care.

The Board of Social Services will apply the new standards in the post-eligibility treatment of income beginning with the month of July 2015 for all new cases and cases subject to re-determination.

The community spouse’s resource allowance (CSRA) remains unchanged. The community spouse’s share of the couple’s countable resources is the greater of $23,844.00, or one – half of the couple’s total resources, not to exceed $119,220.00. These figures will be effective from July 1, 2015 to June 30, 2016.

The increased standard also changes the computations of the applicable allowances.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

How to Finalize and Wind Up a Probate Estate in New Jersey (Part I)

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Probate Estate Administration Attorney and Law Firm

By statute and case law, the Executor under a Last Will is required to settle a decedent’s estate expeditiously and efficiently and to distribute estate assets to designated beneficiaries. After collecting and then itemizing estate assets and paying the decedent’s debts and death taxes, the Executor or Administrator should do what is necessary to close out the estate. In order to accomplish this goal, the Executor or Administrator must account to the estate beneficiaries when he or she proposes to be officially discharged from this position.

An estate can be closed in one of four fashions: (1) the funds can simply be distributed directly by the Executor or Administrator to estate beneficiaries; (2) the funds can be distributed to heir(s) after he or she signs a Release and Refunding Bond where each waives his or her right to a formal accounting; (3) distribution can be made after the beneficiaries each execute a Refunding Bond and Release following receipt of an informal accounting; or (4) an Order has been signed and filed by a Court following the filing of a Verified Complaint and Order to Show Cause for approval of the Executor’s (or Administrator’s) formal or informal accounting to the heirs.

An Executor or Administrator by law is able to make distributions of estate assets directly to the intended beneficiaries with little or no formality and little or no paperwork. However, this formality is not without risks. Typically, the estate representative (executor, administrator) will not be discharged by the Surrogate’s Court unless Refunding Bonds and Releases are signed and filed. If the Last Will or administrator’s appointment required a bond to be posted, the bond will continue to be imposed and the costs of discharging the bond will be the Executor’s personal responsibility. Although an Executor most often doesn’t have to be bonded, an Executor waives the protection of a Refunding Bond and Release by not having such a document signed by each beneficiary prior to distribution to him or her. Few attorneys will allow a client to close an estate without a signed release and refunding bond from each beneficiary.

It is not unusual for families with little r no conflict with a straightforward probate proceeding to execute a Refunding Bond and Release without requesting any accounting or information from the Executor or Administrator. By doing so, however, the beneficiaries of an estate are placing themselves at some degree of risk, especially if the executor was in fact dishonest. This is because the execution and filing of such bonds closes out the estate and discharges the Executor or Administrator from his/her position without further legal liability. I’ll discuss this subject further in my next post.

To discuss your NJ probate or estate administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

 

How to Finalize and Wind Up a Probate Estate in New Jersey (Part II)

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Probate Estate Administration Attorney and Law Firm

In our last post about finalizing an estate, I discussed several key obligations that New Jersey estate and probate laws placed upon an executor or administrator. Let’s continue the discussion.

Distribution of Estate to Beneficiaries
What is the role of the Executor in getting the assets of the estate to the beneficiaries? The answer often depends on the nature of the assets to be distributed. There is distribution of non-probate assets, (2) distribution of specific bequests, (3) distribution of the residuary estate.

While perhaps surprising to many readers, non-probate assets are outside the scope of an Executor or Administrator’s responsibility to the estate. Non-probate assets are not counted in the Executor’s or Administrator’s commission or bonding obligation. An Executor has knowledge of the existence of non-probate assets, information regarding said assets should be given to the beneficiaries of assets, but that’s it. In my opinion, the Executor should go no further.
What are non-probate assets? First, non-probate assets consist of assets such as life insurance, annuities, individual retirement accounts, and other retirement plans known as qualified plans. These assets are paid directly to the named beneficiaries. Said accounts or policies are only paid to the estate if there is no named beneficiary, which then makes them probate assets subject to the jurisdiction of the Executor. If there is a named beneficiary, the Executor or Administrator should simply provide a certified copy of a death certificate to the beneficiary so that he/she may claim the proceeds from said accounts or policies. If no beneficiary is named, the Executor or Administrator will provide Letters Testamentary to the financial institution holding said asset and will refer that asset to be retitled or paid over to the estate.

Then there are pay on death accounts commonly referred to as transfer-on-death (TOD) or paid-on-death (POD) accounts. These are generally bank accounts, but are also utilized with government bonds as well (ie., EE, US Savings bonds, H bonds, etc.). To claim these funds, the TOD or POD beneficiary must provide a certified copy of the death certificate to the custodian. The beneficiary can obtain a copy of the death certificate at the municipality where the decedent resided at the time of his/her death.

Finally, assets can pass by law under New Jersey’s survivorship statute. Examples include accounts listed as joint tenants with right of survivorship. To claim the funds, the death certificate is produced by the surviving account holder and, by law, the funds are transferred to the joint surviving account holder.

With respect to real property, it is a misconception that legal title has to be immediately revised to remove the decedent’s name. Not true. It is not necessary to transfer the ownership of property by deed from the estate to the surviving owner. When the property is finally sold or conveyed, the grantor will merely recite the predecessor’s death in the deed recital.

Today, many financial institutions will only release one-half of the jointly owned/non-probate assets to the legal survivor until a waiver is obtained by the State of New Jersey, unless the beneficiaries are Class A beneficiaries (i.e., spouse, parent, children, or other lineal descendants). Whereupon the assets will be released immediately if a Form L-8 is executed at the financial institution. For more remote relatives and beneficiaries, some or all of the asset will not be released until a tax waiver is received from the state of New Jersey.

To discuss your NJ probate or estate administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.

 

How to Finalize and Wind Up a Probate Estate in New Jersey (Part III)

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Probate Estate Administration Attorney and Law Firm

In our last post about finalizing an estate, I discussed several key obligations that New Jersey estate and probate laws place upon an executor or administrator. Let’s continue our discussion today.

I mentioned that you can legally close an estate without an accounting to beneficiaries but New Jersey probate laws clearly allow beneficiaries the right to an accounting regarding the affairs and transactions of the estate. This principle was affirmed in a NJ Superior Court decision which stated:

“It is elementary that the Executor is under a duty to account for the assets of the estate coming to his or her possession or knowledge; and if, through failure of his or her fiduciary duty, he or she is unable to do so, each is chargeable with their full value. It is a primary duty of one exercising such trust functions to gather in the assets of the estate; and in the discharge of this duty, to use only such care, skill, diligence, and caution as a man of ordinary prudence would practice in like matters of his own, it is also held to the utmost good faith.”

In fulfilling a fiduciary relationship, the estate representative is governed by the “prudent person” standard which in lay person’s terms means being “reasonably alert and responsible”. Where the fiduciary fails to fulfill his/her obligation, “the beneficiaries and others with an interest in the estate may file exception(s) with the probate court, challenge the account in respect of the sufficiency of the disbursements made, and the Executor may be personally surcharged with the economic consequences of his/her failure of duty.” The term “surcharged” means, simply “penalized dollar for dollar” for what they screwed up and cost the estate.

An accounting may be filed in an “informal” or “formal” manner. An informal accounting is a general summary of the assets obtained by the Executor/Administrator, as well as income received and spent by the estate, disbursements made by the estate, distributions made by the estate, and proposed final distributions. In many instances, an informal accounting will summarize classes of expenditures rather than make line-by-line itemizations. I will go over more about this subject in my next post.

To discuss your NJ probate or estate administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.