Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick P. Niemann, Esq., NJ Elder Law Attorney
 
Often times when I meet with new clients, the first appointment is not with the parent(s) but with the children.  Commonly, they come to us after or during a crisis, such as a parent’s hospital or nursing home stay.  Just as often they have little or no information about what is going on with the parent, medically and financially, and cannot provide much of the information we need to assist them.

Communication between parent and child before a crisis is so important and can provide peace of mind and reduce stress for both.  The following are some of the questions that families should discuss, which will often begin a dialogue about the type of preplanning parents can do before a crisis occurs.

1. Children should know roughly how much and where their parents’ assets are.  Do they have enough to sustain the healthy spouse should one spouse become ill and need extended hospitalization and/or nursing home care?

2. What does the income picture look like?  If one spouse dies, how much income will the surviving spouse be left with?  Will there be a significant drop in income?  Often time’s steps can be taken before that spouse passes to help boost the surviving spouse’s income.

3. Is financial support anticipated?  People are living longer than ever.  Many people are at risk of outliving their money.   Answering this question means not simply looking at current expenses vs. income but looking at the next step in the elder care journey and the next step after that and asking “Do I have enough to pay for long term care and if so, for how long?  And if not, what is my plan then?

4. What types of insurance are there (ie., health, long term care, life)?  Is coverage adequate? If not, can coverage be increased?  You certainly want to do that before you become uninsurable.

5. Are there a power of attorney and a health care directive and where are they?  Are they up to date or stale?  If these documents are not in place then the only alternative is a costly and time-consuming process called guardianship.  The court will be involved in your family’s affairs and you may not get the result you want.

6. Is there an up to date will?  A clear, thought out estate plan can avoid family squabbles after the parent passes away. Even people with small estates should have a will.  Also, make sure the original will can be located. Probating a copy is difficult and expensive.

For further information and advice in any elder law or estate planning matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, toll-free at 888-800-7442, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., NJ Wills, Trusts & Estate Attorney

Very often, when I prepare wills, powers of attorney and health care directives (living wills) for clients, some react with surprise when they see the length of my documents.  “Why”, they say, “is the will you are preparing multiple pages when my previous one was only 2?”   “The document is designed to cover as many scenarios as possible”, I explain, “not knowing which scenario may in fact occur”.  It is not good enough to simply address the most likely ones, especially if yours turns out to be one of the uncommon ones.

Narrowly or poorly drafted wills can cause unpleasant and expensive results.  Let’s take the simple task of designating an executor, the person who is appointed the official representative of the estate and is charged with gathering the assets, paying the debts and taxes, if any, and following the instructions set forth in the will and making final distributions to the heirs.  It is a good idea to have one or more backup or alternate executors, in case someone can’t or won’t serve, when the time comes.

Now, most people would think in terms of the executor dying as the reason a back up is necessary, but that is just one possible scenario. Yet, I not infrequently see a will drawn up that states “if my executor dies then I appoint my alternate to serve”.  Let’s say Child A is the executor and Child B is the alternate.  Mom dies and A doesn’t want to serve.  No problem. A will step aside in favor of B, right?.  Except that A is alive and the will only provides that B can serve if A has died.  (Note the key term “died”, not refused to serve).  So, what now?

B can serve as administrator.  Same role and responsibilities but some very important differences. An executor can serve without a bond if the will so provides but an administrator cannot.  And that can be an expensive difference.  The bond acts similar to an insurance policy in that the company issuing the bond will pay out the inheritance if the assets are lost or misappropriated.  The bigger the estate the higher the cost, sometimes tens of thousands of dollars.  While a bond can be very important, many close knit families see it as unnecessary.  Unfortunately, in our case there is no choice.   Had the will stated that the alternate can step in if the executor dies or otherwise can’t or won’t serve, then the bond could have been avoided.  A very expensive mistake and a reason you want to be sure that the attorney drafting your will is experienced in estate planning or elder law.

For further information and advice in any elder law matter, particularly your will, trust or estate planning documents, do not hesitate to contact me at 732-863-9900, or fniemann@hnlawfirm.com.

Fredrick P. Niemann, Esq., NJ Estate Administration Attorney

If you inherit property, of course you should be grateful and count your blessings. Still, consider the possibility that the gift may come with a big string attached-a debt linked to the prop¬erty, such as is particularly common with real estate or a car. In that event, the question arises as to whether the debt must be satisfied from the particu¬lar asset or from the decedent’s estate more generally. How this question is answered can cause a big swing in the respective gift amounts for beneficiar¬ies of an estate.

Historically, the law presumed that the debt was not to be paid from the property that was connected to it. The reasoning was that a true gift should not come laden with such a burden. Over time, as taking on debt became commonplace, this thinking changed and statutes flipped the conventional assumption. Increasingly, these laws start from the premise that the property left to someone includes the debt on the property, unless the decedent in his or her will clearly indicated a different intent. That is where careful estate planning, with professional guidance, comes in.

It is best to leave no doubt for the ordinary lay reader of a will. A general directive in the will to pay all debts of the testator is too nebulous. Instead, if the intent is not to keep the asset joined to the debt, language something like this should be used in a will: “If [the specific asset] is subject to a mortgage, security interest, or other lien, I direct that my executor pay the debt from other prop¬erty of my estate which is not given to a specific person or entity.”

This scenario was played out re¬cently in a case in which a farmer left to his (favored?) son three different farms, each of which was encumbered by debt. To his other son he left the residue of the estate. When the father died, the executor used part of the es¬tate proceeds to pay off the loans to the farms, so that the first son would re¬ceive them debt-free. Not surprisingly, the second son, whose inheritance was thereby diminished, brought the matter to court.

The second son prevailed, forcing payment of the debts for the farms to come from the farms themselves. The father’s will directed in a general way that debts were to be paid from the estate. However, under the relevant state statute, that was not a sufficiently explicit indication of intent to satisfy the debts on the farms from the residu¬ary estate. In other words, the will had not clearly shown an intent that the first son was to receive the farms debt-free. As a result, the first son got the three farms, but he, not the second son, also got the responsibility for paying off the attached encumbrances, which totaled almost a quarter of a million dollars.

For further information and advice in any estate matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

It Really Does Matter!

Fredrick P. Niemann, Esq., a NJ Wills Attorney

A number of years ago, a woman’s husband died leaving a will and some assets, one of which was a 401k.  The marriage was a second for her husband, who had two sons from his first marriage.  While he was single he had changed the beneficiaries of his life insurance and 401k plan to his sons and had redone his will.

After his second marriage, the husband and his new wife bought a new home together.  They asked their real estate attorney, who handled the purchase for them, to draft a new will as well.  The husband listed for his attorney the assets he wanted to pass to his sons and which to his new wife.  The 401k he wanted to go to his wife.  Unfortunately, the attorney didn’t understand the difference between probate and non-probate assets.  So when he wrote a will that specifically left the 401k to the wife, he didn’t know that the will would have no effect on this asset because the beneficiary designations on file with the custodian of the 401k plan still listed the sons from the first marriage.

When the husband died, the wife received a big shock when she was told that she had no interested in the $500,000 account.  That’s because a will doesn’t automatically control the distribution of all your assets.  Contract property such as life insurance, annuities and retirement accounts pass in accordance with whom you have designated on the beneficiary forms completed and filed with the life insurance and annuity companies or retirement account custodians.  Other types of property pass by operation of law such as joint accounts with right of survivorship or real estate that is owned by husband and wife.  When one owner dies, the property automatically passes to the surviving owner.  It does not matter what the will says.

That is what happened in our story.  The 401k is contract property so it passed according to the beneficiary designation form on file, not by the will.  The wife tried unsuccessfully to get a court order directing the funds be paid to her.  She did recover about half of the account balance in a litigation settlement, less fees and costs.

The moral of the story is that although many people think drafting a will is simple and often undertake to do it themselves with a “will kit” or ask an attorney to do a “simple will”, they may miss important steps that must be taken that can save a lot of heartache and money.

To learn about these and other elder law issues, go to www.hnlawfirm.com or contact Fredrick P. Niemann, Esq. at (732) 863-9900 or by e-mail at fniemann@hnlawfirm.com

Warning: Your Decision Does Matter

Fredrick P. Niemann, Esq., NJ Estate Plan Attorney

When creating an estate plan, especially in your will and/or trust, an important decision is who to name as your fiduciary. A fiduciary is a fancy legal term for the person who will take care of your property for you if you are unable to do it yourself, such as the executor of an estate, the trustee of a trust, or an attorney-in-fact under a power of attorney. Your first instinct might be to name one of your children as a fiduciary, but if you want to avoid conflict among your children, this might not be the best option.

When naming a fiduciary, it is important to be able to trust the individual, which is why people often name family members as fiduciaries. However problems can arise when a parent with two or more children names one child as a fiduciary. According to Fredrick P. Niemann, an attorney from Freehold, New Jersey, who spoke on the issue of family harmony at a recent estate planning seminar, a child is often not the best fiduciary for several reasons:

• It is hard for a child to be completely objective. 
• Children often disagree over many things, including how long the estate should take to complete, the selling of assets, and the division of personal property.
• Children often don’t communicate with each other well.

An alternative is to hire a professional fiduciary. A professional fiduciary can be a bank or investment firm with trust administration experience with trust powers, a certified public accountant, or a trust company. A professional fiduciary will charge a fee, but the fee should be explained ahead of time. In addition, because a professional is experienced in managing money and property, your assets are more likely to increase under this person’s or institution’s guidance.

To ensure that your family has some input, you can include a provision that allows one or more family members to discharge the fiduciary if they feel the professional is not doing a good job. This will allow your family to make sure the fiduciary is performing properly without having the burden of acting as fiduciary.

For further information and advice in any estate planning matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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

We all know we are supposed to do estate planning, but not all of us get around to it.  So what happens if you don’t have a will when you die in New Jersey? Your estate will be distributed according to New Jersey state laws, which may or may not be the way you want it to be distributed.

Dying without a will is called dying “intestate”. New Jersey has laws that determine what will happen to your estate if you don’t have a will. If you are married, New Jersey law will award a portion of your estate to your spouse, with the rest divided among your children.  If you don’t have children, then your estate will be divided among other living relatives such as your parents or siblings. If you are single, New Jersey provides that your estate will go to your children or to other living relatives if you don’t have children. If you have absolutely no living relatives, then your estate will go to the state.  This is called escheating to the state of New Jersey.

Note that any jointly held assets, such as bank accounts or real estate, will go directly to the co-owner. In addition any life insurance policies or retirement accounts will go directly to the beneficiary designated on the account. And if you have a trust, any assets in the trust will go to the beneficiary designated in the trust.

One purpose of a will is to name a guardian for your young children; if you do not have a will, the court will determine who will act as guardian of your children. The court will also appoint the person who will administer your estate. In addition, if you are unmarried but have an unregistered partner, your partner will not inherit anything from your estate without a will naming him or her as a beneficiary.

The best way to ensure your estate is distributed the way you want it is to plan your estate with a will and/or a trust attorney.

For further information and advice on NJ estate planning laws, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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

• What authority does the Trustee have to distribute the assets in the trust? Is the Trustee’s authority to make distributions limited to health, maintenance, education and support, or are distributions within the Trustee’s total discretion? If the beneficiary is also serving as Trustee, then distributions to the beneficiary/Trustee must be limited to health, maintenance, education and support. If the beneficiary and the Trustee are separate people, you may want to give the Trustee more flexibility in deciding how to distribute assets. You should also let the Trustee know what your goals are in terms of the distribution of assets.

If the trust is for the benefit of the spouse and children, is the primary beneficiary the spouse, the children, or both? If the trust is for the benefit of minor children, is the goal of the Trustee to hold the assets until the child reaches a certain age, or to use them for certain things along the way such as education, marriage, etc? 

• Are your alternate beneficiary designations appropriate? In the event that all of your primary beneficiaries pass away, who will your assets go to? Many people take the approach that half of the assets will pass to one spouse’s siblings and their children, and the other half of the assets will pass to the other spouse’s siblings and their children. However, this approach may not work for you, in which case you should make sure that your assets are directed to one or more specific people or organizations. This desire should be stated in your Will.

   

• Are your Executors, Trustees, and Guardians still the appropriate people, in the appropriate order? Over time, people and relationships change, so it may be appropriate to rearrange your Executors, Trustees and/or Guardians.

You have the ability to appoint one or more people to serve in these roles, as well as Successors for those people. In addition, if addresses are listed, you should verify that they are current.

• If you have a taxable estate (assets exceeding $675,000), have you and your spouse reallocated ownership of and title to your assets to minimize estate taxes? Estate planning for a taxable estate will normally include the formation of a trust upon the death of the first spouse. However, if all of your assets are in joint name, there will be no assets available to fund that trust because all of the assets will pass by operation of law to the surviving spouse.

This means that the estate tax exemption of the first spouse will be wasted. Accordingly, if you have a taxable estate it is critical that you re-title your assets pursuant to your attorney’s recommendations. By doing this, upon the death of one spouse, he or she will have sufficient assets in his or her individual name to fund the trust(s) that will create the estate tax savings in the future.

• Is your General Durable Power of Attorney more than 10 years old? If so, banks in New Jersey are not required to accept it. We recommend that your General Durable power of Attorney and Living Will be refreshed every 3 to 6 years.

   

• Does your General Durable Power of Attorney continue to name appropriate attorneys-in-fact? You are allowed to name one or more attorney(s)-in-fact to act in your place with reference to your financial matters in the event that you are unable to do so. You should verify that your named attorney(s)-in-fact and any successors have current addresses.

   

• Does your General Durable Power of Attorney allow for Medicaid planning or gifting? Many seniors want the ability to engage in asset protection planning to shelter assets from the cost of nursing home care. Your General Durable Power of Attorney should specifically grant your attorney(s)-in-fact the power to engage in this type of planning. We are recommending to all or our clients that they update their General Durable Power of Attorney if it does not specifically authorize this type of planning in the future.

   

• Does your Health Care Power of Attorney reference the Health Insurance Portability and Accountability Act (”HIPAA”)? The HIPAA privacy rules have created a new category of private information called “Protected Health Information” (PHI) or “Protected Medical Information” (PMI). In order to avoid any issues about the persons to whom your health care provider may divulge your PHI, you should specifically state who has the right to receive your PHI. We are recommending to all of our clients that they update their Health Care Powers of Attorney to include a HIPAA provision to avoid any inability of a Health Care Representative to receive information in the event of medical emergency.

   

• Does your Living clearly state your desire about what medical treatment you want to receive or refuse in a terminal situation? You have a right to direct your care if you are terminally ill. You should make sure your Living Will clearly states your desires.

   

• Does somebody know where all of your estate planning documents are? If you have the greatest estate plan in the world, but nobody knows how to access your documents in the event of an emergency, it is going to be useless to you. One or more trusted people should know where they can find originals and copies of your Last Will and Testament, General Durable Power of Attorney and Living Will/Health Care Power of Attorney. In addition, we recommend having copies of your Health Care Power of Attorney and Living Will placed into your medical record with your primary care physician. Note that your original General Durable Power of Attorney is a very powerful document and could allow somebody to access your accounts while you are alive without your permission. As a result, it may be best not to have the original of the General Durable Power of Attorney easily accessible.

Your New Jersey estate plan is an investment. If your estate plan does not address your current situation, or if it was not completed through appropriate re-titling of assets, then that investment may have little or no value. The law gives you the right to direct what happens to your assets upon your death, and gives you the ability to minimize any tax consequences. You should take advantage of the law to make sure that your estate plan meets your needs today and into the foreseeable future.

Fredrick P. Niemann is managing partner at Hanlon Niemann located at 3499 Route 9 North, Freehold, NJ. His practice focuses primarily in the areas of Elder Law, Asset and Estate Protection Planning, Medicare, Medicaid and Veteran’s Benefit Assistance. He can be reached at fniemann@hnlawfirm.com, or by calling 732-863-9900, Ext. 101.

Fredrick P. Niemann, Esq., NJ Medicaid Attorney

When I talk with people about long term care and the Medicaid program I sometimes hear very strong opinions that “it is wrong to transfer assets in order to qualify for Medicaid to pay for nursing home care”.  The person making the statement, however, typically hasn’t really given any thought to what that means in real life situations.

Let me give an example.  Mom is 85 years old and living alone.  While she clearly shows the signs of aging and should have put in place a plan in case she needs long term care, like most people, she hasn’t considered it at all.  She receives a $100,000 inheritance from her brother.  She has always considered her family first, ahead of her own needs, and wants to transfer this inheritance to her son, who is struggling to make ends meet and just lost his job.  She believes she has everything she needs financially and her maternal instincts are to help her child.  You may or may not believe she is being foolish in her thinking but it is her genuine belief.

Times are tough.  Families do what they always do.  They pitch in and help each other out.  Except that if Mom gives this money to her son and needs nursing home care in the next 5 years she won’t qualify for Medicaid because of the transfer.  So, is Mom trying to beat the system, transferring assets to qualify for Medicaid?  No, I think we all would agree that this is not what is motivating her.  But it’s not that simple.  It never is in the real world.  Mom ought to be thinking about her long term care needs but she isn’t. 

Had she consulted with an elder law attorney she could have set up a plan that would allow her son to receive the inheritance (or she and her son could share the inheritance) by setting up a trust.  And when an attorney sat down with Mom and explained to her what would happen if she needs long term care, she would quickly agree that it was not a good idea to simply transfer the inheritance to her son.  She just had never had that conversation before and no one ever explained it to her in that way.

So, instead of having that conversation after she received the money, if we had it before the inheritance had been received, my advice to Mom would have been to keep the money in a trust, in case she needs it for long term care, but that it would be possible to transfer some of it to her son, should he need it.  We would have to manage the trust very carefully but it is clearly doable.  I wouldn’t call this beating the system. It is a case of families pulling together in times of need.  Isn’t that what families are supposed to do?  It also helps the long term care facility that will provide the care to Mom by ensuring sufficient private pay funds to support their vital care services.

For further information and advice in any elder law matter, do not hesitate to contact me at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

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

Do you own assets held in joint accounts, or where you have a named beneficiary? These assets will not be distributed in accordance with your Will. Instead, all joint assets will pass to the surviving joint owner, and all assets with a beneficiary designation will pass to that beneficiary.

Accordingly, if you have a convenience account with one of your children, the assets in that account will pass to that one child at your death, regardless of what your Will might say. You should carefully review the ownership and beneficiary designation of all of your assets to be sure that the assets will be distributed to the right people at your death. 

• Are your residuary beneficiaries correct? Residuary beneficiaries are the people who receive the balance of your estate after (i) all the debts, expenses and taxes have been paid, (ii) any specific bequests have been made, and (iii) joint accounts or any assets with beneficiary designations have been distributed to the appropriate people. You should review this section of your estate planning documents carefully. If one of the beneficiaries were to predecease you, will that beneficiary’s share pass to his or her children, your other children, or otherwise?
   
• Are assets being distributed to your beneficiaries outright or in trust? If assets are distributed to a beneficiary outright, the beneficiary can do whatever he or she pleases with the assets. However, those assets are at risk from the beneficiary’s creditors, spouse in a marital action, and poor judgment. It is possible to create trusts that give the Trustee (who may also be a beneficiary) great flexibility in distributing the assets to the beneficiaries, and at the same time protects those assets from a beneficiary’s immaturity, misuse, creditors, divorce, etc. Also, trusts may be used when you want to direct how assets will pass upon the beneficiary’s death. For instance, many times in a second marriage a trust will be established for the benefit of the spouse, but provide that upon the spouse’s death the assets will pass back to the decedent’s children. You should speak with your attorney about the benefits and drawbacks of using a trust to distribute your assets to your beneficiaries.
   
• If you currently have a trust established, are the trust terms still appropriate? Many people establish trusts for young beneficiaries. You should look at the ages when the assets will be distributed outright to the beneficiaries, keeping in mind that assets distributed to somebody who is 18 are likely to be spent differently than if distributed to a person who is 25 or 30 or older.  It may be appropriate to increase or reduce the ages at which the beneficiaries will receive an outright distribution from the trust. Alternatively, it may be appropriate to give the beneficiary an income stream, or give the Trustee greater discretion to make distributions from principal. For example, a trust might say that a child will receive the income from the trust starting at age 25, and that the principal must be distributed to the child outright at age 30 and 35. Prior to age 35, the trust principal could be used for the beneficiary pursuant to the terms of the trust. By structuring a trust this way, the beneficiary has an opportunity to learn how to manage money.
   
• Do any of your beneficiaries have special needs? If you have a beneficiary who is elderly or disabled, that beneficiary may need to qualify for public benefits in order to maintain their standard of living. If a person who is receiving public benefits receives an inheritance directly, the public benefits will cease, and the person must exhaust the inheritance to pay for the care that the public benefits would otherwise have provided for. Once the inheritance is exhausted, the person must then reapply for benefits. This can be a traumatic and expensive process. Instead, you should consider leaving assets in a purely discretionary Special Needs Trust for the person, drafted in such a way that it does not interfere with the person’s ability to receive public benefits. By using this approach, the trust becomes a security blanket for the beneficiary, not a burden.

Fredrick P. Niemann is managing partner at Hanlon Niemann located at 3499 Route 9 North, Freehold, NJ.  His practice focuses primarily in the areas of Elder Law, Asset and Estate Protection Planning, Medicare, Medicaid and Veteran’s Benefit Assistance. He can be reached at fniemann@hnlawfirm.com, or by calling 732-863-9900, Ext. 101.

Fredrick P. Niemann, Esq., a NJ Trust Law Attorney

Your living trust is much more than just a will or a trust document that says which heirs get what percentage or which specific items that you leave behind should you die. A living trust details how and when heirs are to receive their inheritance, who is to take over any businesses in question, and many crucial issues of your estate. A living trust is very specific in how an estate is to be dealt with. Therefore, the choice of a trustee for your living will is a very important decision in your estate planning process.

Living Trusts: Choosing a Trusted Friend
When choosing a person to be the trustee of your living will, you need to answer on question:

• Who could step into my place and confidently act as I would in carrying out my wishes?  

It is vitally important to choose someone that you have full faith and confidence in. You should feel at ease that he or she would carry out your requests as they are written in your estate planning documents. Some typical choices include a:

• Close family friend 
• Close family member 
• Child 
• Professional trustee

While you may feel completely secure in trusting this huge responsibility for carrying out your wishes to a family member, there are several situations when that is not wise or possible. In that case, your estate planning wishes can be addressed by a trusted outsider.

Living Trusts: Choosing an Outside Trustee
If you do not have a close friend or relative that you feel comfortable leaving this job to, or if by selecting one of the heirs will cause conflict, then there are other options. You can hire an outside trustee like:

• Your bank 
• A trust company 
• Your lawyer 
• A financial advisor

These professionals are well versed in what it requires to be a trustee and can often work more expediently and effectively, which saves the heirs money and time. While there are many benefits to not having a family member involved as the trustee of your living trust; there are also some drawbacks to using a bank or trust company as your trustee.

• Higher fees 
• Minimal estate value of around $700,000

No matter whom you choose, you want to be sure that you have full confidence in them to do exactly as you want, no matter what other people say. There may be heirs who are unhappy with the terms and conditions of the living trust and will try to sway your representative to do as they want. Knowing that you have a strong, trustworthy individual protecting your wishes will provide peace of mind.

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.