Under New Jersey law, a spouse-even those disinherited in a will-may be entitled to one third of their partner's augmented estate. The augmented estate indicates the estate minus funeral and administration expenses and any enforceable claims. This amount may be received only when a surviving spouse has not been living separate and apart or has not stopped cohabiting as man and wife as in divorce or some other action which has release the parties from marriage. The one third elective share also applies to domestic partnerships.

If the divorce has been initiated but is not yet finalized, provisions in a will benefitting a spouse are enforceable if the other spouse dies before a divorce judgment is issued.

All of this should certainly have an impact on how couples go about estate planning. Couples heading toward divorce do well to review their will well in advance and ensure it says what it should.

All of this fits into a larger scheme of how divorce affects estate planning. In coming posts, we'll be following a series of articles on this topic, which will touch on gifting, aging, non-probate assets, power of attorney, trusts, and life insurance.

Source: nj.com, "Your Legal Corner: Estate planning and divorce-the elective share," Victoria M. Dalton, January 29, 20912.

What would be included in a basic estate plan? Opinions may differ, but a basic estate plan should generally include the following steps: an inventory of current assets; defining one's estate planning goals; identifying family relationships that touch on estate planning; addressing long-term care, end of life and funeral matters; and developing a plan of action.

In terms of addressing estate planning goals, family relationships and one's decline, there are a number of questions that need to be answered. On a basic level, one needs to determine one's long-term life goals. That includes questions of retirement, how long one will work, and funding for long-term care. In the latter area, the possibility of nursing home living needs to be addressed, or at least the question of where one will live if one can no longer care for oneself.

Finally, an action plan must be developed to address these things. This will include selecting a power of attorney, drafting a living will, and establishing any trusts, care agreements, deed transfers, insurance, funeral arrangement, and various other matters.

This, of course, would only constitute a basic estate plan. There are many things that are possible in this area, but each person's plan will be uniquely suited to their needs.

Source: nj.com, "Your Legal Corner: Basic estate planning," Victoria M. Dalton, January 1, 2012.

Tags: estate planning, will

Special needs trusts can hold a number of types of assets, including money wom in a lawsuit resulting from an accident that disabled a person. And these funds are insulated from creditors, including the government. Special needs trusts are widely considered the most effective way to transfer wealth to a disabled child or grandchild without putting his or her eligibility for government assistance at risk.

Trust payments must go directly to service providers rather than the disabled person, and the trust itself should include provisions which protect trust income and assets from creditor claims.

Special needs trusts can be revocable or irrevocable, and may be set up during the grantor's lifetime or through the grantor's will or other trust documents upon their death. It is best set up prior to the beneficiary's 18th birthday, but not necessary.

Also important is that the trust, rather than the disabled person, be listed as the beneficiary for any IRA and 401(k) accounts, as well as annuities and life insurance policies. It is also wise to let family and friends know that they should not make an outright gift or leave an inheritance to the disabled person directly.

There are a number of options with special needs trusts. Each family will have slightly different needs, and it is best to speak to an attorney regarding your specific situation.

Source: Business Insider, "Unique Ways To Ease The Financial Burden Of Special Needs Care," Joe Mont, January 11, 2012.

2010 estates that were at or below $5 million, as well as 2011 estate at those values, were and are eligible to elect out of paying federal estate tax. 2012 estates at or below $5.12 million will generally have the ability to elect out of federal estate tax as well. These exemption amounts are affording many people the opportunity to pass on much greater wealth.

The default changes in these numbers, as many have noted, have led to a situation where estate planners are talking about a "good year to die," and other such notions. While there is truth in this type of expression from a financial point of view, it is hardly the kind of thing most families want to focus on.

Some are hopeful, perhaps overly so, that 2013 will bring a repeal of the federal estate tax. But there aren't any substantial signs that such a scenario will take place. What we know is that individuals will be left with a $1 million exemption amount if no action is taken. That will reduce planning options for even moderately wealthy Americans.

Suffice it to say, time is getting short to take as much advantage as possible of the current exemption amount.

Source: Forbes, "Federal Estate Tax Still Headed in the Wrong Direction," Matthew Campione, January 9, 2012.

Medicaid estate recovery is a good thing to be aware of when approaching estate planning, as it can affect the assets of the Medicaid beneficiary's spouse, as well as other beneficiaries. One issue that can come up with Medicaid estate recovery is what happens when the Medicaid beneficiary's spouse-also known as the community spouse-predeceases the Medicaid spouse.

If the deceased community spouse's will provides that the spouse is to receive all their property, then it would be clear that all that property would go to the institutionalized spouse who will become a Medicaid beneficiary. When the will excludes that spouse, though, it isn't so clear. In New Jersey, that spouse would be able to waive his or her right to a one-third elective share, but if this is done within five years of applying for Medicaid, the waiver is considered a gift and penalties could result.

Under New Jersey Medicaid regulations, all assets owned in the name of either the husband or wife or both names are pooled together and divided so that each spouse receives half of the joint assets up to a maximum amount allowed to the community spouse. The rest of the assets must then be spent on care for the institutionalized spouse.

With these matters it is important to consult a knowledgeable attorney, but it may be possible to exempt funds which are titled only in the name of the deceased community spouse from Medicaid recovery.

These comments only touch on the surface of possibilities with respect to Medicaid estate recovery. Our point here is only to make you aware of this aspect of estate planning, so that you will be more aware in your planning.

Sources: nj.com, "Your Legal Corner: Community spouse and Medicaid estate recovery," Victoria Dalton, December 18, 2011.

One thing that can be said for sure is that Medicaid benefits which were correctly paid and receive on or after the recipient turned 55 will be subject to recovery. In general, the government has the right to recover benefits from a deceased beneficiary's estate unless there is a surviving spouse, a child under the age of 21, or a permanently disabled or blind child.

One point to note is that, in New Jersey, Medicaid is generally not able to recover funds from an estate with respect to a life estate interest, since that interest is no longer there once the Medicaid beneficiary dies. This is certainly an advantage, but there are drawbacks to life estates as well.

There may be situations in which Medicaid may not recover on a life estate interest, but depending on the circumstances, Medicaid may be able to assess penalties because of the way the property was transferred. As always, it is important to work closely with an attorney when attempting to navigate various areas of law with respect to your estate plan.

In our next post, we'll take a final look at Medicaid estate recovery in terms of how it can affect a spouse of a Medicaid beneficiary.

Source: nj.com, "Your Legal Corner: Life Estate and Medicaid Estate Recovery," Victoria Dalton, December 4, 2011.

The recovery process-which is authorized by the federal government under the Medicaid program-is initiated against the estate of a deceased Medicaid beneficiary. Medicaid beneficiaries are notified of the recovery program during their initial application and for eligibility and annual redetermination process. The recovery process itself is initiated after the beneficiary's death.

In general, Medicaid can recover benefits against deceased individual recipients who have been permanently institutionalized and have received the benefits while they were age 55 or older.

In terms of the amount recovered, states are required to seek recovery for services provided to a beneficiary at any age in a nursing facility, intermediate care facility for the mentally retarded, or other medical institution. States may opt to recover up to the total amount spent on the individual's behalf for medical assistance or other services covered under the state's plan.

Under federal law, Medicaid may recover payments by means of probated assets, including real and personal property and any other resources in which the deceased person has title or interest. Under New Jersey law, written directives may limit Medicaid estate recovery. To know for sure what assets may be eligible for estate recovery, you need to consult recent case law to see what types of assets have been subjected to recovery.

In our next post, we'll continue looking at this topic. Specifically, we'll look at general guidelines for when Medicaid will be able to recover on an estate.

Source: nj.com, "Your Legal Corner: The Medicaid recipient and estate recovery," Victoria Dalton, December 4, 2011.