New Jersey Guardianship

The decision to obtain a guardianship in New Jersey over a loved one is never an easy decision to make.  I have assisted hundreds of clients in Monmouth, Middlesex, and Ocean Counties to obtain guardianship over a family member or friend, and while the decision may not be easy, there are numerous circumstances in which a guardianship is necessary means to an end.

Many people do not understand the guardianship process or the costs of a guardianship.  Over the next several posts, I want to explore the process of guardianship in New Jersey–the procedures involved before filing for guardianship in New Jersey and the court proceeding that results in a guardianship.  I will also discuss the costs involved with a New Jersey guardianship.

Special Needs Trust Victory

The mother of a special needs child was recently awarded in excess of $441,000 from her daughter’s special needs trust for services that the mother provided to her child.  The Superior Court of New Jersey, Appellate Division, recently upheld a trial court’s award of reimbursement to the mother.

Some years ago, the mother obtained a court judgment that entitled her to compensation for the services that she provided to her daughter at the rate of $15 per hour, but the Bank, which served as trustee of the trust, stopped paying the mother for those services.  Several more years passed and after the child’s death, the mother sued for back compensation.

The court sided with the mother and awarded her in excess of $441,000.  This is a great decision for the mother and a testament to how much work she performed on behalf of her daughter.  The name of the case is Matter of Rogiers.

Living Trust Offers Insurance

Over the years, numerous clients have asked me, “Do I need a living trust?”  A living trust is often used as a Will-substitute, meaning that the trust is used as a substitute for a last will and testament.  There are a great number of books that have been written on the subject of living trusts, and celebrity financial planners often tell their audiences that they should have a living trust as part of their estate plans.

These books and celebrity financial planners tell people that the primary benefit of having a living trust is the avoidance of probate.  “Probate” is the process of proving the validity of a last will and testament, which is typically accomplished by submitting the Will to probate before the surrogate of the county in which the decedent died domiciled.

InNew Jersey, the process of submitting a Will to probate is extremely simple and extremely inexpensive.  The process takes about thirty minutes inNew Jerseyand costs about $150.  The fact of the matter is, a living trust would cost you more than probate will cost your estate and takes a lot more time than it takes to set up a living trust properly.

This is not to say that I never use living trusts in my practice.  I use living trusts quite frequently.  When a client tells me that he owns real estate in another state, for instance, a condominium inFlorida, I advise the client that he should have a living trust as part of his estate plan.

By titling theFloridaproperty into the living trust, I will tell the client, his family will avoid the need to probate his Will inFlorida.  A person’s Will must be probated in every state in which the decedent died owning real estate and in the state in which the decedent died domiciled.  So, if Mr. Smith has his primary residence inNew Jerseybut owns a condo inFlorida, his Will must be submitted to probate inNew JerseythenFlorida.

Probating a Will in two states can be very costly for your estate and very confusing for your executor, who may have to retain legal counsel in two states.  Plus, probate in some states, such asFlorida, is very expensive.  Probate inFloridacosts between 3% and 5% of the value of the probate property.  If Mr. Smith’s condo is worth $200,000, submitting his Will to probate inFloridamay cost anywhere from $6,000 to $10,000.  That is an expense worth avoiding, and a living trust can be an excellent tool for accomplishing this goal.

Recently, I learned of another benefit of living trusts—increasing the owners FDIC insurance coverage for bank accounts.  Many of my clients are concerned about putting too much money in any one bank because deposits that exceed $250,000 are not protected by FDIC insurance.

A living trust can increase the FDIC insurance coverage of an account.  For instance, assume that Mr. Smith has $1,250,000 and four children.  Mr. Smith wants to purchase a CD at High Interest Bank.  High Interest Bank has a jumbo CD product that offers 2% interest, which by today’s standards is pretty good.  Mr. Smith wants to invest his entire $1,250,000 in a CD at High Interest Bank, but he is concerned about the CD exceeding the FDIC coverage limit.

Mr. Smith informs me of his desire, and I draft a revocable living trust for him that states he is the lifetime beneficiary of the trust and his four children will receive the monies remaining in his trust upon his death.  In other words, I draft a living trust for Mr. Smith that is really just a Will-substitute.

Mr. Smith takes the living trust to High Interest Bank and opens a CD account in the name of the trust using his Social Security number as the tax identification number for the trust.  Since he is the owner of the trust and there are four beneficiaries, the trust’s deposits are insured up to $1,250,000—$250,000 for each of the five people (the owner, Mr. Smith, and the four beneficiaries) named in the trust.

Mr. Smith gets what he perceives to be a great interest rate, and  his entire deposit is backed by the FDIC.

Can I Draft My Own Will

I have given hundreds of seminars on topics of elder law, covering topics such as estate planning, Medicaid planning, estate administration.  When you present that many seminars, you hear the same type of questions.

I just finished giving my bi-annual series of seminars at Monmouth-Ocean Educational Services Commission.  One attendee asked me a question that I have heard before and that I believe many people would like to ask:  “Do I need a lawyer to draft my Will or can you draft your own Will?”

My standard answer to this question through the years has been:  You can draft your own Will.  You could also operate on yourself if you wanted, but I wouldn’t recommend it.

While my thoughts on the subject haven’t changed, I think they deserve a bit more explanation given the plethora of television ads that I see, advertising services that assist you with drafting legal documents for a minor fee.  I am also cognizant that more-and-more people are computer savvy and there are a number of other programs, not advertised on television, on the internet.  (Al Gore is getting older now, and he invented the internet, as you may know, so my target audience is getting more-and-more computer savvy.)

I went to law school for three years.  My practice is concentrated in elder law.  All I do, six days a week, is work on elder law issues—estate planning, Medicaid planning, estate administration, and guardianship issues.  I have been practicing elder law for over ten years.  I am a certified elder law attorney, meaning that I passed an examination with a very high failure rate, was recommended by five other attorneys who concentrate their practices in elder law, and work on a very high number of elder law files every year.

So, given the above, do I think you know as much about elder law as me?  Quite honestly, for 99.99% of the people reading this article, the blunt answer is, no.  Do I think you would know as much as I know aboutNew Jerseyelder law issues if you use a really spiffy computer program?  Same answer, no.  That’s the fact.

I may not be good at sports.  I don’t know anything about engineering or medicine or plumbing, but I know a lot aboutNew Jerseyelder law issues.

I have met thousands of people with regard to their estate planning issues.  I can tell you that almost universally, if left to their own devices, people would make mistakes if they drafted their own Will.

In order to draft a Will correctly, you must understand what happens after a person dies, how an estate is administered.  I always tell people that a Will is not for you, it’s for your family.  A Will is not even an effective document when you are alive.

So, even if a computer program prompts you with multiple options on a given issue, do you truly understand what those selections entail and how those selections work with other selections that you may have made?  Do you understand how property even passes when you die?

Most people would think that is great because they are “avoiding probate,” but do you want to avoid probate inNew   Jersey?  InFloridaorCalifornia, you might want to avoid probate because probate is expensive in those states, but inNew Jersey, probate is very simply and inexpensive.  Two of the most prominent TV personalities selling these do-it-yourself programs (Suze Orman and Robert Shapiro) are fromCalifornia.  So, if you purchase those services, you may be getting advice for what is best inCalifornia.

Avoiding probate could cause disastrous results for your executor.  It may leave your executor with bills that he cannot pay because he has no money.  The executor may then have to sue the people who received your money as surviving joint account owners and under beneficiary designations.

So, do I think you can draft your own Will?  Yes, but I still also think you can operate on yourself, and I wouldn’t advise either cost-saving technique.

Avoiding the Need for a Guardianship

I read that 55% of people die without a last will and testament.  That statistic doesn’t surprise me at all.  I think Wills are the subject of much procrastination or fear or both.

People say I’ll get a Will, then put it off and forget about it.  Some people associate a Will and death so closely it’s as if they believe that they’ll sign their Will on Tuesday and die on Wednesday.

To tell the truth, though, what surprises me even more is that people do not have powers of attorney and living wills.  A power of attorney and living will permit someone else to make decisions for you.

Most people fail to understand that no one else can make decisions for them unless they have granted another person authority to make decisions for them.  Doctors and hospitals may listen to family members—of course, they may not—but no one is going to listen to another person about financial decisions.

If your spouse became disabled, you, as her husband, would not be able to make financial decisions for her unless your wife had granted you a power of attorney.  If there were a dispute concerning your healthcare—for instance, some family members were saying one thing and other family members were saying something else—then doctors may refuse to listen to the family if you have failed to grant someone the authority to make healthcare decisions for you.

I strongly recommend that clients grant someone else the authority to make decisions for them by signing powers of attorney and living wills in favor of a family member.  I recommend this even more than I recommend someone have a Will.  A Will, I tell my clients, is for someone else, because you are no longer with us.  It’s an important document, but not nearly as important as a power of attorney and living will.

If you do not have a power of attorney and living will, then there may come a time when you need a guardian.  A guardian is a person who is appointed by the court to make decisions for you.

I have filed hundreds of guardianship actions over the course of my career, and I have probably been appointed a hundred times by a court to be involved in guardianship matters in one capacity or another.  And I can tell you, based upon my vast experience, that a guardianship is something you should avoid.

While guardianship proceedings are necessary, the proceedings are only necessary, in most instances, because people fail to plan.  In order for someone to become your guardian, he will have to outlay about $4,000 to $6,000.  A guardianship proceeding involves, at a minimum, two doctors and two lawyers and the court.  In the end, you will be responsible to pay these bills, not the person seeking to be appointed your guardian.

Once someone is appointed as your guardian, he still may have to return to court to ask permission to sell your house or engage in other financial transactions or planning.  These return trips will cost your estate even more money.

From start to finish, the appointment of a guardian may take three to four months.  If your situation requires immediate attention—for instance, if you are in a hospital and require immediate medical attention—then someone may need to be appointed your special medical guardian, then seek appointment as a full guardian.  All of this, of course, adds to the expense of the guardianship.

While you may never need a guardian, most people do not, you never know.  The need for a guardian does arise with some frequency.  It is not a rare event.

My experience with guardianships and with planning for people in need of care tells me that the most important, most fundamental documents a client can have are a living will and a power of attorney.

Executor’s Duty to Account

One of the biggest responsibilities that any executor or trustee has is to account to the beneficiaries of the estate or the trust.  Executors and Trustees are fiduciaries, meaning that they owe the utmost duty of care to the beneficiaries of the estate or trust.  A fiduciary must invest the assets prudently and must distribute the assets according to the terms of the last will and testament or trust.

A fiduciary’s accounting must follow a certain format.  That format provides the beneficiaries with a detailed understanding of how the fiduciary has handled the assets of the estate.

In return for his accounting, the fiduciary requests that the beneficiaries of the estate sign a release.  The release, as the name implies, releases the executor from any liability he may have for mishandling the affairs of the estate.

For this reason, the accounting is one of the most important tasks that a fiduciary performs, because the role of a fiduciary is chock full of liability.  All fiduciaries should insist upon being release from liability.  Otherwise, the fiduciary remains subject to lawsuits.

So, what does an accounting entail?  Through an accounting, the executor informs the beneficiaries what assets came into his hands.  For instance, if Mrs. Smith dies owning a home, a car, five bank accounts, and a brokerage account, all of those assets go on the accounting providing date of death values for each of those assets.

But not all assets that Mrs. Smith owned go on her executor’s accounting.  If Mrs. Smith’s brokerage account named a beneficiary, for instance, the brokerage account would not be listed on the accounting, because the brokerage account would pass outside the control of the executor according to the beneficiary designation.  The same would be true if Mrs. Smith owned a life insurance policy that named a beneficiary.

Furthermore, if one of Mrs. Smith’s bank accounts were jointly owned with another individual, the bank account would pass to the surviving account holder upon Mrs. Smith’s death.  As with the accounts that have beneficiary designations, a jointly-held bank account passes outside the control of the executor.

Passing outside the control of the executor is not a good thing by the way.  It doesn’t, for instance, mean that the assets aren’t subject to death tax.  It just means that the executor lacks control of the assets, which could be a bad thing.

Another major aspect of the accounting is what debts the executor paid.  When he paid the debt, from what account he paid the debts, and what the nature of the debt was.

The accounting must also show what income the assets of the estate have earned.  For instance, did the bank accounts earn interest income, and if so, how much.

The accounting must show what changes have occurred in the assets of the estate.  For instance, Mrs. Smith’s brokerage account may have gone up or down in value.  That gain or loss in value must be reflected on the accounting.

Furthermore, if a bank account were closed and the proceeds were transferred to another account, the accounting should reflect that fact.  Perhaps the executor closed four of the five bank accounts and moved those accounts to an estate account.

Finally, the accounting should show the current nature of the estate’s assets.

In return for faithfully carrying out his duties and providing a comprehensive accounting, the beneficiaries should release the executor from his duties.  If a beneficiary refuses to sign the accounting, then the executor will have to file his accounting “formally,” which means he files it with the court.  The court will then review the accounting and pass final judgment on it.

Drafting a Trust

A trust can be an excellent vehicle for passing your assets onto future generations.  There are various reasons that a person might wish to create a trust.  For instance, the person might have a disabled child, a minor child, or a child who has a problem with drugs or alcohol.  All of these situations call out for the creation of a trust for the benefit of the family member/beneficiary.

Yet, it is equally true that not all estate plans call out for a trust, and in fact, a trust can be a rather cumbersome tool for passing an individual’s assets onto beneficiaries.  Care must be taken in the consideration of whether or not a trust is needed in a given situation, and if so, how that trust is drafted.

In my law practice, I am frequently asked questions about trusts.  To most people, a trust is a thing of mystery.  People tend to confuse the concept of a “trust” with whom or what is serving as the “trustee” of the trust.  Then they tend to think that a trustee must be a big bank that charges big fees.

The fact of the matter is, a trust is simple an agreement.  It is an agreement amongst the parties to the trust—the grantor, the trustee, and the beneficiary.  The “grantor” is the person who establishes the trust.  The grantor contacts the attorney to draft the trust.  The grantor places his money or other assets into the trust.

The “trustee” is the person who manages the assets of the trust and makes distributions of the assets of the trust to the beneficiary.  The “beneficiary” is the person whom the trust was designed to benefit.

For instance, mom establishes a trust in her last will and testament for her minor child, naming her brother as the trustee of the trust.  Mom is the grantor, the brother is the trustee, and the child is the beneficiary.

A couple with minor children is a common circumstance for the creation of a trust.  If you have a child who is four years old and you are planning for your death, you aren’t going to leave the money directly to the minor child.  A minor cannot manage money because any contract that a minor enters is voidable.  Plus, the vast majority of minors do not have the skill set to manage money.  Let’s face it, many adults don’t have the skill set to manage money.

At dinner the other night, my family was discussing the estate of a friend who had died.  The friend was very wealthy, and at the time of his death, he had two children who were minors.

In his Will, the friend had created trusts for the minor children and specified that the children would not receive any of the assets of the trust unless the attended and graduated from college.  The child received a specified amount of money upon graduating from college and additional money if the child attained a post-graduate degree.

My wife thought this was a great idea.  At first blush, I thought it sounded good too, but being a lawyer, I began to contemplate the ramifications.

Apparently one of the friend’s children is attending college, but the other child is not.  So, under the terms of his Will, as I understand those terms, the one child may receive her entire share of the estate (assuming she continues with her education) and the other child may receive nothing.  Obviously, this puts the one child at an economic disadvantage.  It also could serve as a wedge between the children.  Rightly or wrongly, how do you think the child who did not receive any money will view the child who did receive money?

Furthermore, attending college is not a guarantee of success.  Steve Jobs and Bill Gates did not graduate from college.  Steve Jobs dropped out in his first semester and, I believe, Bill Gates only completed one semester.

My point is, when you draft a trust, you must think through the possibilities and the complications.  Not giving money to a minor child is a good thing.  Never giving money to a child could be a very bad thing.

What Is an Executor as Compared to a Trustee?

What is the difference between an executor and a trustee?  I get that question a lot.  Most often when a client has a reason to have a trust in his last will and testament.

A trust in a Will is called a “testamentary trust.”  It is a testamentary trust because it is found in the last will and testament of a person.  A testamentary trust is ineffective until the person in whose Will the trust exists dies.  Until that person dies, the testamentary trust can be revoked at any time and no assets can be placed into the trust.

A testamentary trust can be compared to a “living trust.”  A living trust is a trust that does not exist in a person’s last will and testament.  A living trust can be effective during the person’s life and can have assets titled into it during the person’s life.

A trust is merely a contract, typically, a written contract, between the person who formed the trust, called the “grantor,” and the trustee.  Whether the trust is a testamentary trust or a living trust, the role of the trustee is the same.

When a client asks me to draft a Will for him, I always ask him the name of the person he wishes to name as the executor of his estate.  Sometimes, the client may tell me that one of his beneficiaries is a minor or is disabled or has problems spending money.  In these instances, I may recommend that the client have a testamentary trust drafted into his Will.

After discussing with the client the terms he would like drafted into his testamentary trust, I ask him the name of the person he would like to name as the trustee of the trust.  It is often at this time that I am asked the question, “What is the difference between an executor and a trustee?”

An executor is essentially a liquidator.  His role is to wind down the business that you conducted during your life.

An executor must submit your last will and testament to probate before the surrogate of the county in which you resided when you died.  The executor must gather up your assets, which is frequently called “marshalling” your assets.  He may deposit those assets into an estate account or multiple estate accounts.

An executor must pay all of the bona fide debts that you incurred and the debts of your estate.  Part of a person’s debts includes any death taxes that may be owed upon his death.  An executor must account to the beneficiaries of the estate and must distribute the assets of the estate to the beneficiaries after the beneficiaries have approved his accounting.

An executor is a fiduciary, meaning that he has the highest duty of care in administering the estate for the benefit of the beneficiaries of the estate.  A typical estate may take anywhere from nine months to two years to fully administer.

A trustee is also a fiduciary, meaning that a trustee has the highest duty of care to administer the assets of the trust for the benefit of the trust’s beneficiaries.  A trustee is responsible for investing and administering the assets of the trust.  A trustee can be held liable to the beneficiaries of the trust if he invests the assets of the trust in an imprudent manner.

A trustee must also distribute the assets of the trust to the beneficiaries of the trust according to the terms of the trust.  The trust may say that the trustee can distribute the assets of the trust to a beneficiary for his education and only his education.  The trustee would be bound by those terms.

The role of trustee may last for several months or several decades.  So, unlike an executor, a trustee may be serving in his role for a long, long time.

An executor and a trustee are similar in that they both have a duty of absolute care to the beneficiaries of the estate/trust, but their roles in respect of the beneficiaries are quite different.  An executor is more of a liquidator, whereas a trustee is more of a business manager.

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  • December 7, 2018
    Karen T.
    Years ago, I enlisted John Callinan's services as my Dad's elder care decision!. Fast foward... he was there again for my aunt. It's was a stressful time, but John made sure everything was handled properly with info on what to expect, from her nursing home admittance, the legal end of the sale of her home and preparing for Medicaid. He was always courteous, professional and available. Paula Fama, at John's office, handled the Medicaid application. She outlined the steps needed and information required by Medicaid and explained everything fully. After dealing with mounds of paperwork, she filed the application, resulting in an approval. Paula was a God-send, not to mention what a calming force she was as just the thought of applying can be mind boggling. She was friendly and helpful and never seemed to mind my many phone calls, emails and questions. Best decision again!
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    Trying to do what's best for my parents, John and his staff were recommended to us. Aside from their expert knowledge and advice, the thing that made this difficult process much easier was their accessibility. I was actually surprised at how quickly they would call or e mail me back with answers to my questions. Most times it was within minutes. Made a very difficult process bearable. Highly recommend them!
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    John's entire staff, especially Paula Fama, provided 1st class service to me and my family. They were available to regularly meet with me to discuss legal matters and answered all my questions as they guided me through the legal process. 1st class all the way!
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    Mr. Callinan and his paralegal Paula Fama worked hard and quickly to get my mother qualified for Medicaid after her own funds ran out. They were very accessible and responsive and were able to help make this stress-inducing process so much easier.
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Being a Professional

Many people in business say, “I’m a professional.”  It would seem as if everyone is a professional.  Yet, the public is truly disserved when people who are not professionals hold themselves out as professionals.

In the sense that a professional is a person who is highly trained in a particular field, I would agree with the broadening of the term.  In our society, many people obtain advanced degrees or train for extended periods of time in order to master a particular field or skill, and I think that is great.

But there is one key aspect of professionalism that separates the wheat from the chaff when it comes to people who call themselves “professionals.”  A true profession is a field that is governed by a complex and rigorously enforced code of ethics.

Lawyers, for instance, are extremely mindful of the code of ethics that governs their profession.  Not only do lawyers have a code of ethics—after all, any field seeking to be a “profession” can write a bunch of rules—but the codes of ethics that governs lawyers is rigorously enforced.

As an elder law attorney, I frequently help clients apply for Medicaid benefits.  The Medicaid program is a government health insurance program for needy individuals.  To say that the laws governing the Medicaid Act are complicated would fail to convey the nature of the law.

Numerous individuals have engaged my services for a family member who had “simple” finances and whose Medicaid application was going to be “no problem at all.”  The reality is, no matter how simple a person’s finances are, when you are looking at what an individual did over the past five years—which is the period of time that the Medicaid office reviews—you are always going to find financial events that just don’t look good.  There may be checks made out to “cash” or gifts to family members or payments to caregivers under the table.

I cannot tell you how many clients I have had who have small estates, yet over the past five years have owned more then ten, and sometimes more than twenty, bank accounts.  It is as if the client’s hobby were moving her money around from bank-to-bank.  These movements of money make the Medicaid application extremely complex because the movement of money must be traced and a failure to trace the money can result in a denial of Medicaid benefits.

In the past few years, I have seen several companies spring up that assist people with applying for Medicaid benefits.  These are not law firms.  In fact, the staff may have no formal training whatsoever.

The nursing homes will refer patients’ families to these companies, and in some cases, the company that is assisting the family also handles the debt collection work for the nursing homes.  In other words, the same company that duns patients for unpaid nursing home bills is the company that is offering the family its services in applying for benefits.

Ironically, many people who apply for Medicaid benefits fail to obtain eligibility for the exact date when those benefits are needed.  For instance, the patient may have made $7,000 in gifts over the past five years.  That patient would be ineligible for Medicaid for approximately one month.  Now, the very same company that assisted the family with the Medicaid application will be dunning the family for the unpaid month of nursing home charges.

This type of conflict of an interest could never occur with an attorney.  An attorney must advocate only for the client, whether the attorney agrees with the client’s position or not.

Furthermore, since Medicaid is a complex law the nuances of which can make all the difference between an acceptance letter and a denial letter, how can a non-attorney advocate for the family if benefits are denied or are not obtained exactly when needed?  These companies don’t have the skills, and they don’t have the legal right to go to court and advocate for another individual.

Finally, these companies charge the same amount or more than law firms charge for the same services.  So, the families are getting less for more.  That’s never a good thing.