BREAKING TRUST

The State of New Jersey never stops trying to prevent people from planning for long-term care, often ignoring state and federal laws. As those that read my articles on a regular basis already know, the cost of long-term care in this area of the country is exorbitant. Very few individuals could afford to pay the cost of such care for a sustained period of time.

For example, care in a nursing home in the Monmouth County area averages $200 a day, or $6,000 a month, not including incidental charges such as prescription medication, diapers, and laundry. Given those costs, the average price is close to $6,500 a month, or $78,000 a year.

And despite the fact that the number of individuals needing long-term care is rising, most people are failing to plan for it. As an elder care lawyer, I present many seminars on this topic and I meet thousand of people at these seminars, so I can say with some knowledge that people don’t think they’ll ever need long-term care.

Which makes it a shame when the State tries so hard, too hard, to prevent people from qualifying for Medicaid. The State’s newest attack on Medicaid planning strategies involves inheritances.

In a previous article, I mentioned that the only person you cannot disinherit in your Will is your spouse. If you pass away and you are married, your spouse is entitled to roughly one-third of your estate. This right to one-third is called the “elective share.”

If a wife were to disinherit her husband and the wife died first, the husband could assert his right to an elective share and take one-third of the wife’s estate. The husband must, however, assert his right to the elective share. The husband could allow his wife to disinherit him by failing to assert his right, or “waiving” his right to the elective share.

The Department that administers the Medicaid program for the State has published regulations that address the issue of the elective share. Those regulations indicate that if the husband were to waive his right to an elective share of the wife’s estate, the waiver would be treated as a transfer of assets, which has the potential of rendering the husband ineligible for Medicaid benefits. This is a legitimate point.

When engaging in Medicaid planning for a married couple, elder law practitioners often draft a Will for the wife that leaves the husband enough of the wife’s estate to satisfy the elective share. In this way, the husband is only getting as much of the wife’s estate as is necessary to avoid a transfer of assets penalty. Taking that planning technique further, many practitioners establish a special needs trust in the wife’s Will to receive the husband’s share of her estate.

Special needs trusts are designed to pay for items for which Medicaid does not. Since the trust is only available to pay for items that Medicaid does not, assets in special needs trusts do not affect Medicaid eligibility.

Well, the State doesn’t like this legitimate and well-grounded planning technique, because they can’t knock the husband off Medicaid when his wife dies. So now the State is claiming that assets placed in a special needs trust such as the one described above are unavailable to the husband. In short, the State will treat the situation as if the husband did not assert his right to the elective share, imposing a period of ineligibility for Medicaid on the husband.

Like many of the State’s attacks against Medicaid planning, this one has no basis in law, state or federal. The State’s practice only serves to reinforce something I have said before on numerous occasions, the elderly need people who will stand up for their rights.