Understanding Why a Qualified Disclaimer Can Be Helpful For New Jersey Estate and Death Tax Claims

Understanding Why a Qualified Disclaimer Can Be Helpful For New Jersey Estate and Death Tax Claims

 By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, PC., a NJ Estate and Probate Administration Attorney

 

I use Disclaimers a lot, they are very beneficial.   Most people do not know what a Disclaimer is or how it works.   A Disclaimer is essentially a legal document in which an individual refuses to accept a bequest, inheritance or gift from a person who wishes to leave property to him or her.   Your reaction may be, “why would someone want to do that?”.   The answer is simple; maybe the surviving beneficiary has plenty of their own assets and the tax consequences of having more assets would be disastrous.   Other circumstances involve a lack of interest in receiving the asset or concerns that the nature and quality of the asset does not justify the risk associated with obtaining legal ownership.   For example, if a decedent gifts polluted property to a beneficiary and the beneficiary accepts title, then the beneficiary is obligated for the clean-up of that property under New Jersey and some Federal laws.  Therefore, the beneficiary will not want to become the owner and therefore, must refuse the gift.  Thus, the use of a Disclaimer is important.

 

Rather than, citing to you portions of the Federal Regulations on Qualified Disclaimers, I am linking you to a Cornell Law Journal so that you can read the entirety of the Federal Regulations.   I know that it is boring but again, it gives you a broad based background on the subject matter and allows you to better evaluate its possible use.

 

In this blog, I have given you some of the general criteria for a valid Disclaimer.  Read it, if you have any questions, feel free to contact me and we can meet to discuss its potential use for you.

To discuss your NJ estate planning and estate probate 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.

http://www.lawschool.cornell.edu/

 

Nursing Home and Assisted Living Admission Agreements – Are They Legal, and If So, to What Extent?

Nursing Home and Assisted Living Admission Agreements – Are They Legal, and If So, to What Extent?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Medicaid Attorney

Before a person enters a long term care facility they will be asked to sign an admissions agreement.  Sometimes a facility forgets to have one signed (but seldom does this happen).  Even if initially forgotten, the family will generally be asked to sign one by the admissions or business office. When asked to sign, what should you do?  Can you refuse to sign it? If you refuse, what happens next?  These are fair questions and the answers are fairly straightforward.

 

First off, if asked to sign before admission and you refuse, a facility can deny admission.  There is no legal remedy to force admission.  Facilities have the right to establish admission standards both medical and financial.  But if for some reason an individual is admitted without first having signed the admission agreement, then the answer changes. The nursing home is not permitted to discharge a resident for failing to sign the agreement.  That’s because both federal and state law have enumerated permissible grounds for discharge.  While there is no case law on point, I believe the same holds true for an assisted living residence.

 

The more complicated question and the one I am asked most frequently about is the legal and financial liability of the “responsible party” clause found in most admission agreements.

 

Like most agreements, an admission agreement is a contract and therefore is subject to contract law. To learn more about the law of contracts visit my website www.njcontractattorney.com (CLICK HERE).  As a contract the admissions agreement is binding as on the aging resident as well it should be in most material ways (payment, services, etc.), but it is not binding upon the agent/power of attorney/guardian, unless there is a breach of their fiduciary duty to the resident and/or the facility.  Most third parties sign the admissions agreement because mom or dad can’t sign it for some reason. If mom or dad were to run out of money some facilities will look to the “responsible party” to pay.  That’s nonsense. Federal and state law make such a payment clause unenforceable, in my opinion.  Children and others are not legally obligated to care or support a parent or family member in New Jersey. But watch out for Pennsylvania. They have a different law.

 

There are many laws and regulations in place in New Jersey that regulate long term care facilities.  These laws and regulations also apply to admission agreements.  Know your rights!

 

If you’re unsure what to do or if you should sign, call and meet with me.  Together we’ll come to the right decision.  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.

A Lawyer’s Legal Brief in a Recent Estate Probate Litigation Case

A Lawyer’s Legal Brief in a Recent Estate Probate Litigation Case

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate Probate Attorney

Have you ever been interested to read an attorney’s legal brief involving a claim of undue influence in an estate litigation case?   If so, here you go.

As an introduction to the subject, be reminded that lawyer’s write briefs in order to support their legal positions in Court.  Often times, they will cite cases that have been reported going back 150 years, depending upon the legal issues and facts of the case.  Every case regardless of the legal principles cited in a brief are decided based upon the facts. It is the facts that control the outcome of the case and the judge’s decision coupled with the legal arguments made by the attorney.   I am making available a brief that our office recently filed in a case involving probate estate litigation where allegations of undue influence were made.   I hope that you will find this brief interesting with the objective of giving you an introduction to the broad based legal principles and case law concerning the subject of undue influences.   If your fact pattern involves a case of undue influences, give us a call.   We can evaluate the case for you.   Please understand that not all fact patterns are listed in this brief.  There are literally hundreds of cases with facts that are very similar to yours.   Therefore, the assistance of a qualified probate estate litigation attorney will be helpful to determine whether you have a case for or against contesting a Will, Trust or challenging a Power of Attorney, Guardianship action, etc.  Note also that these principles will be very significant if you are an Executor, Trustee, Power of Attorney, Guardian or other person in a fiduciary relationship and third party makes claims against you.

 

To discuss your estate probate litigation 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.

Can A Grantor Be the Trustee of His or Her Own Irrevocable Trust?

Can A Grantor Be the Trustee of His or Her Own Irrevocable Trust?

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Trust Attorney

 

Many lawyers shudder at the idea of allowing the grantor of an irrevocable trust to be the trustee.  The primary reason for this fear can be found in traditional estate tax planning principles.  The Internal Revenue Code provides that any trust wherein the grantor retains the power to control the beneficial enjoyment of the income or principal of the trust will make all of the income on that trust taxable to the grantor.  The Code further provides that any trust where the grantor retains the right to possess or enjoy the property or designate who will possess and enjoy the trust property will make the principal of the trust includable in the grantor’s estate at death for estate tax purposes.

 

However, under President Bush, wherein the estate tax exemptions was increased to in excess of $5,000,000 ($5,400,000 today), the traditional tax planning rationale is less compelling.  Currently, the estate tax rule is triggered only on individuals who have assets greater than $5,430,000, and on married couples who have twice that amount (nearly 11 million dollars).  Recent statistics indicate that only two in 1,000 Americans have assets that exceed the federal estate tax exemption limits, which represents .2 percent, leaving 99.8 percent of Americans without an estate tax concern.  The key question is, why do most advisors, including lawyers continue to advise 99.8 percent of clients to a tax code rule meant for the .2 percent?

 

New Jersey trust law provides that creditors can only access the assets of a trust to which the grantor has retained economic rights.  The question as to what rights the grantor has to review income or principal is a designing issue related to the beneficiary designations in the trust, not the trustees.  The law goes on to clarify that a grantor, as trustee, has the same fiduciary duties to the beneficiaries as any other trustee and it is well-established law that assets of a trust are not subject to personal claims against the trustee, even if the liability arises out of his trustee capacity.  Further, the Restatement Second of Trusts provides that a trustee is prohibited from self-dealing or acting in his or her own best interests.  Nothing in the law is better settled than the provision that a trustee may not advantage himself or herself in dealings with the trust estate.  A grantor’s creditors are only entitled to income or assets available to the grantor, this principle is well-established under the Uniform Trust Code.  So in order to properly provide asset protection, the trust by its terms must prohibit distribution of the principal and/or income to the grantor, and no discretion can be permitted to the trustee or anyone else to distribute it to the grantor.  This will ensure asset protection.

 

The key question becomes what are the practical consequences to the grantor if he or she remains trustee.  If you want to avoid being exposed to creditor claims, against the income and principal of the trust, then no benefits should be retained, but the right to be trustee is still permitted.  The only adverse consequence is that all of the income is taxed on the personal income tax returns of the grantor, and he or she is responsible for the income tax on the trust income.  Further, all of the trust principal is included in the estate of the grantor at death, but for the 99.8 percent of Americans who are not subject to estate tax, this is not an adverse result; in fact it’s usually a preferred result.  If there is any question as to whether the grantor has the ability to pay the income taxes, then the trust can contain a provision that allows the trustee to pay any income tax due to the taxing jurisdiction exclusively (not the grantor) by reason of the inclusion of the income from the trust on the personal tax return of the grantor.  This restricts distributions to the grantor, and only allows the trustee to distribute to the taxing jurisdiction, and only as to the income tax caused by the inclusion of the trust income on the tax return of the grantor.

 

The key benefit of letting the grantor be trustee, and the one most important to clients, is maintaining control.  Most people who have worked their whole lives accumulating assets are not ready to just turn them over to the kids or other third parties.  Doing so not only puts the assets outside of the control of the grantor, but it also creates a risk of losing the assets to the creditors, predators, and lawsuits of the individual to whom they are transferred. Nothing could have a more adverse impact or be a greater risk to a client than that.  Whereas the ability to control the assets, and to continue to manage the investments of the assets and keep them in the form they are currently in or change them as they desire along the way, is one of the greatest benefits to grantors when serving as trustee of their irrevocable asset protection trust.

 

So being a trustee and grantor of your trust does not subject it to risk.  There is no legal authority that indicates being a trustee of your own trust makes it subject to your creditors.  There is an entire line of cases where courts have invaded trusts where the grantor is the trustee, but in every case it is due to the grantor’s “fraudulent conveyance and management” of the assets where the trust was invaded, not because the grantor was trustee.  So, be informed and be conscious of your clients’ needs, and share with them the many advantages of having them stay in control of their assets.

 

To discuss your NJ 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.

Can a Spouse Refuse the Support of His or Her Spouse to Qualify for Medicaid

Can a Spouse Refuse the Support of His or Her Spouse to Qualify for Medicaid

By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Medicaid Attorney

 

Federal Law (42 U.S.C.A. § 1396r-5 (c) (3)) allows a community spouse to refuse to pay for the institutionalized spouse, applying for Medicaid which if properly authorized, stops the State from considering his or her funds in the calculation of eligibility by the institutionalized spouse to qualify for Medicaid, live in a nursing home, assisted living residence or home based program.  The practical effect of this statute means New Jersey must then pursue collection action against the other spouse for support in order to be compensated for the case being provided.

 

There are 3 ways to declare spousal refusal.  The first is the infirmed spouse must assign “to the State any rights to support from the community spouse.”  42 U.S.C.A. § 1396r-5 (c) (3) (A).  If no express assignment is possible due to the physical or mental disability of the spouse, the State can still pursue a “support proceeding against a community spouse without such assignment.”  Id. at (B).  Finally, refusal can be granted if denial would cause an “undue hardship.”  Id. at (C).

 

Despite the federal existence of this procedure, many states’, including New Jersey, have on the books Medicaid regulations that have not enacted nor allow a procedure like this to be used by the community spouse.  See N.J.A.C. § 10:71–4.8.  However, the 2nd Circuit Court of Appeals ordered a neighboring state’s Department of Social Services to grant a couple’s request for the community spouse to refuse to help the institutionalized spouse under this procedure, assigning the infirmed spouse’s rights to the State of Connecticut and allowing that person to qualify for Medicaid.  Even though the state (Connecticut) does not have this assignability procedure available, the court held that the federal statute was unambiguous in allowing such a refusal to be performed for purposes of determining eligibility.  Id. at 234.  As long as there is adequate standing (denial of Medicaid by New Jersey) that would have been granted if this “spousal refusal option” were in place and used by the couple, there is a strong legal case to go to the federal courts and argue that it must be implemented and recognized in NJ.

 

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.