Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick P. Niemann, Esq., a NJ Estate Planning Attorney

Whether it is a palatial estate where Rockefellers and Vanderbilts would feel at home or a rustic cabin in the woods complete with an outhouse, a family vacation home often carries sentimental value that doesn’t show up on financial ledgers. That is all the more reason why owners of such homes should plan for the orderly transfer of the home for future generations. With the help of some professional guidance, owners can choose from a variety of options tailored to particular situations and priorities.

The issues that arise most often for second and subsequent generations concern how to allocate both the benefits and the burdens of the vacation home.

• Outright sale of the property to a third party is simplest, but be prepared for substantial capital gains if the property has been in the family long enough to appreciate in value;
• A simple bequest can be used to keep the home in the family, but, by itself, it may not address issues such as use and maintenance;
• A trust, in particular a Qualified Personal Residence Trust, has some tax benefits. The grantor gifts the property but retains a right to use it for a definite term. The value of the gift is calculated as the value of the property, less the retained interest. However, if the grantor does not outlive the retained term, the property will be included in the grantor’s estate;
• A limited liability company (LLC) has the benefit of protecting assets generally. If someone is injured on the property, the owner’s liability would be confined to the ownership interest in the property;
• A partnership has the advantage of a formal structure, but each partner would have to contribute.

Additional issues that arise most often for second and subsequent generations concern how to allocate both the benefits and the burdens of the vacation home, that is, the use of the home and expenses, including maintenance, insurance, and taxes. This can be spelled out in writing in as much detail as is desired, but it is not advisable to leave these matters to chance. There is the potential for discord and bruised feelings in even the most congenial families if, for example, one sibling is left out of the prime vacation times while shouldering more than his share of costs for maintenance and repair. Parents might head off at least some of these issues by setting up an endowment to cover ongoing expenses for the home.

Looking a bit farther down the road, whatever legal forms are used should provide a means by which one or more of the family members can sell his or her interest in the home to the remaining family members. Considering that there may be honest disagreement as to the property’s value, it makes sense to look for consensus by using two separate appraisals, one arranged for by the selling family member and one by the remaining owner or owners.

If you have any questions, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

Fredrick P. Niemann, Esq., a NJ Special Needs Trust Attorney

One of the most pressing needs for disabled beneficiaries is medical care.

Medical Insurance
It is crucial that the disabled beneficiary obtain some form of medical insurance. Options include the following:

• Private Medical Insurance. Typically, the only source of private medical insurance at regular rates is through the parent’s coverage with the parent’s employer. Parents of such child must make every effort not to lose their jobs.
• COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1996 (COBRA) allows former employees and their dependents to continue the employer’s coverage for a limited period of time, commonly 18 months. However, if the employee became disabled within two months of the qualifying event causing him to lose medical insurance coverage, COBRA coverage may be extended for 29 months. If the former employee died, divorced, or became entitled to Medicare, then the employee’s dependents are eligible for 36 months of coverage.
• State-Mandated High-Risk Pools. Many states have high-risk pools to cover persons who are uninsurable in the private market. This coverage often tends to be very expensive.
• Medicare. Medicare is only available to persons under 65 if they are disabled and have 20 quarters of coverage. If they receive SSD, then two years after the determination of disability they are entitled to Medicare. Persons receiving Medicare should obtain a Medicare supplement policy. There is usually a very limited open enrollment period to obtain this coverage after which it becomes impossible to obtain because of pre-existing conditions.
• Medicaid. Persons receiving SSI also receive Medicaid. In non-SSI states having a Medically Needy program, persons qualify for Medicaid by spending down their income if income is above a certain amount. Some states have income caps. Other ways of obtaining Medicaid are through state Medicaid waiver programs, including various Kid Care programs available in many states. Eligibility rules vary. A Katie Beckett waiver program is very desirable, because the income and assets of the parent are not deemed to the children. Some states do not call their programs Katie Beckett, which is a specific categorically eligible group of Medicaid recipients, but the effect is the same because those state identify groups of children with disabilities and provide for Medicaid eligibility so the waiver services are available. Slots tend to be extremely limited.

Non-Covered Medical Expenses
Typically, Medicaid pays for 100 percent of covered expenses. However, very often, psychological services, certain types of testing and some special therapies are not covered. It is appropriate for a trustee to pay for these non-covered services. It is also appropriate for a trustee to pay for dental care, prescriptions, and podiatrist care.

Provider Non-Acceptance
Some providers do not accept Medicaid, because of the low reimbursement rate. It is difficult to find a dentist participating in the program. Some persons with disabilities choose physicians who do not accept Medicaid. It is appropriate for a special needs trust to pay for services from those physicians.

Out-of-Pocket
If the person with a disability receives Medicare, rather than Medicaid, there may be co-payments, deductibles and payments for services that Medicare does not cover. It is appropriate to pay for those costs from a special needs trust.

If you have any questions concerning Medicaid or a trust for a disabled or handicapped child, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

Fredrick P. Niemann, Esq., NJ Elder Law Attorney

As the economy worsens, incidences of elder financial abuse are reportedly on the rise. The elderly are particularly vulnerable to scams or to financial abuse by family members in need of money.

A recent study found that up to one million older Americans may be targeted yearly. Family members and caregivers are the culprits in 55 percent of cases, although financial losses are higher with investment fraud scams.

While it is impossible to guarantee that an elderly loved one is not the victim of financial abuse, there are some steps you can take to reduce the chances. One option is to have more than one family member involved in caring for the loved one. You can also encourage the elder to get involved in community activities to ensure he or she has a wide range of support. Using direct deposit as much as possible is also helpful. And of course you should always screen caregivers carefully and verify references.

Financial abuse can be very difficult to detect. The following are some signs that a loved one may be the victim of this kind of abuse:

• The disappearance of valuable objects
• Withdrawals of large amounts of money, checks made out to cash, or low bank balances
•  A new “best friend” and isolation from other friends and family
• Large credit card transactions
•  Signatures on checks look different
•  A name added to a bank account or newly formed joint accounts
•  Indications of fear of caregivers

If you suspect someone of being financially abused, there are several actions you can take:

• Make a report by calling your local or County Adult Protective Services and/or the NJ Office of the Ombudsman for the Elderly. File a police report if you believe the facts support a crime.
• Explore legal options with a qualified attorney.  In New Jersey, the Chancery Court is available to address alleged legal abuse. The court can intervene if someone in the family is misusing a power of attorney or their role as guardian or conservator.
• Contact advocacy organizations. The National Center on Elder Abuse offers guidance on how to investigate and seek justice for elder abuse. State laws vary, but some have people available to deal with the situation and may be able to get restitution for breach of fiduciary duties.
• Try to get a temporary restraining order from a court while building your case.  Again, speak to a qualified elder law attorney.

If you have any questions regarding an elder law or estate planning matter, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

By Fredrick P. Niemann, Esq., a NJ Estate Planning and Administration Attorney

Many people don’t get serious about estate planning until they are well into middle age.  By then, some of them are part of blended families:  they are marries, and one or both spouses have children from previous families.  Estate planning in such families can be tricky because the spouses may want to provide both for each other and their own children.  If you’re in such a situation, you should proceed cautiously.

Rethinking Retirement Plans
In a blended family, one or both spouses may have a sizable retirement account such as an IRA.  One practice is to name the other spouse as primary beneficiary of the IRA, with the account owner’s children as secondary beneficiaries.  This approach is common in first marriages, in which the children are the offspring of both spouses, but it can lead to trouble in a blended family.

EXAMPLE 1: David Jennings has $500,000 in his IRA.  He names his wife Christine as the primary beneficiary and his tow children from a prior marriage as the secondary beneficiaries.  Thus, if Christine predeceases the children, they will inherit the IRA.  Even if Christine does inherit the account, the balance will pass to David’s children at Christine’s death.

There are two flaws in this strategy.  First, Christine can tap the IRA at will as long as she takes required minimum distributions.  She can take out all $500,000 at once, pay the income tax, and then either spend the money or give it to, among others, her own children from her previous marriage.

Second, in this example Christine is a surviving spouse and sole beneficiary of David’s IRA.  Under the tax code, Christine can roll over David’s IRA to her own new or existing IRA (no other beneficiary can do this).  Then Christine can name any beneficiaries she wishes, such as her own children.

In either scenario, there is no guarantee that David’s children will see a penny of his $500,000 IRA.

How can David avoid this outcome if he wants to provide for Christine and his own children?  One tactic is to divide his $500,000 IRA into two $250,000 IRA’S.  He can designate Christine as the beneficiary of one IRA; his children can be co-beneficiaries of the second IRA. Alternatively, David can leave the entire $500,000 IRA to his children, who can stretch out required minimum distributions over their longer life expectancy and thus enjoy extended tax deferral.  If David adopts this plan, he can leave other assets to Christine, depending on the size of his estate and her financial needs.

Trusts Traps
In blended families, spouses also may use trusts in their estate planning.  The first spouse to die might leave assets in trust for the surviving spouse, who will get the trust income and also might have some access to the trust principal.  At the surviving spouse’s death, remaining trust assets may pass to the children of the spouse who funded the trust.  Some trusts of this nature can be qualified terminable interest property (QTIP) trusts and defer estate tax.

Trusts can play a valuable role in estate planning.  Again, though, trusts can cause problems in blended families. With the arrangement described previously, the trustee might face a conflict between investing for current income (which would benefit the surviving spouse) and investing for long-term growth (which would benefit the trust creator’s children).  In addition, the children may have to wait for many years before receiving any inheritance if the first spouse to die leaves all of his assets to such a trust.

Dividing the estate might be a better solution.  Some assets could be left to the surviving spouse and some to the children, outright or in separate trusts.  If the spouses fear that such a plan would leave insufficient amounts to the beneficiaries, they might buy life insurance and increase the total estate value.

For further information and advice on any estate planning or estate administration matter, do not hesitate to contact me at 888-800-7442, or fniemann@hnlawfirm.com.