Who is to Say You Can't Make a Gift? Undue Influence Over Lifetime Transfers

If a person has a Will and dies, and a beneficiary doesn't like the terms, one grounds for challenging the Will is that the testator (person making the Will) was subject to undue influence when he made it. An example would be a person with 4 children leaving 100% of his estate to one child, who the person relies on.  This doesn't mean that a person can't leave there assets to whomever they please, just that there are situations where people take advantage of a person's fragility to have assets funneled to them.

What happens when a person makes a gift during his lifetime and another party challenges that gift before the person dies?  The recently issued opinion in  Estate of Claudia L. Cohen v. Robert Cohen, Law Div. — Bergen Co. (Koblitz, P.J. Ch.) indicates that under New Jersey case law, the only people who have legal standing to bring a legal action to undue a lifetime gift are:

  • The Grantor (person who made the gift)
  • The Guardian of the Grantor, so long as the Grantor is still alive
  • The Executor of the Grantor (or Administrator of the estate if there was no Will), if the Grantor has died

So what if you have a situation where your mom is living with your sister, and she is transferring assets to your sister, and you think mom doesn't really understand what she is doing, or is scared to say 'no' to your sister?  The answer might be to seek a Guardianship over mom if she is no longer competent and the Guardian can then pursue the gifts made under undue influence.  

Southern States a Tax Lure for New Jersey Residents?

 Where is a retiree to go? If Florida is possibly becoming more expensive as I blogged about in  Moving From Florida?? A Reverse Trend that May Prove Expensive for Residents, and if New Jersey is too expensive as I talked about in Taxed Enough? Looking at Leaving NJ? Domicile and Residency are Key Questions, where is good.

Well, apparently both Georgia and Alabama are vying for your business.  Bizjournals.com reports that Peach State is Great for Retirees and Alabama is Tax Friendly for Retirees.  North Carolina is in the mix too with Kiplinger: N.C. ranks high for retirees

All three states have low income tax, low property tax, and limited or no state level estate tax.  It costs less to live and less to die.  I told a story earlier where being a North Carolina resident saved a client $230,000 in estate taxes.  So what do ya'll think about moving south of the Mason Dixon line?

Taxed Enough? Looking at Leaving NJ? Domicile and Residency are Key Questions

It seems that my in box is full of information on better places to live than New Jersey from a cost perspective (personally, I love the shore and NYC and Philly and skiing all being within 2 hours drive). I got a very thoughtful piece from my friends at RegentAtlantic Capital entitled "When You've Paid New Jersey Enough".  In the article, Bill T. Knox, "reviews the key factors that should determine whether someone who has lived in NJ and then establishes a home outside the state will be successful in escaping the state’s income and death taxes."  

Bill looks at New Jersey domicile and residency from the income tax and estate and inheritance tax perspective.  Domicile is a very tricky question - it is where you intend to be without intending to move.  So if you intend to be an Florida resident, but keep your New Jersey home and all your bills coming here, did you really leave New Jersey domicile?  

And why does domicile matter?  Well, New Jersey income tax applies to all income earned by New Jersey "residents", and the New Jersey Estate tax is levied against a New Jersey resident who dies.  Clearly, if there is a question, New Jersey would like to claim that you live here and you should pay here.  So, if your domicile and residency are supposed to be elsewhere, you need to make sure that you have dotted all "i's" and crossed all "t's" to make that happen.

Quick story - A client of mine died January 1, 2009.  She had changed her residency and domicile to North Carolina in the year before her death.  Her estate is approximately $3.5 million.  Had she dies a New Jersey resident she would have owed New Jersey approximately $230,000.  As a North Carolina resident, her estate tax bill is $0.00.  How is that for some effective Estate Planning???

In "When You've Paid New Jersey Enough" Bill provides a quick checklist of key domicile and residence issues.

Moving From Florida?? A Reverse Trend that May Prove Expensive for Residents

 It is no secret that New Jersey is the most expensive state to die in. New Jersey has the lowest estate tax exemption threshold of the country at a mere $675,000. In contrast, Florida has no state-level estate tax, and the creation of an estate tax is specifically banned by its Constitution. in addition, Florida's state revenues are generated primarily from property tax and sales tax. Due to all of these things, Florida is a less expensive State to live and die in New Jersey.  For years we've been recommending to clients who have homes in both New Jersey and Florida to consider changing their residency of Florida.

Bloomberg.com in Florida’s First Population Decline Since 1946 Squeezes Budget reports that Florida just experienced it's first population decline since 1946 -- that's over 50 years of growth -- and the last decline was apparently as a result of military personnel leaving Florida after World War II.  And the predictions are that this trend will continue:

 "Rising property taxes, increased homeowner insurance costs since the 2004-2005 hurricane season and competition for retirees from other states such as Georgia will damp population growth in coming years".

Additionally, "Sales-tax collections, which brought in 27 percent of revenue in 2008-2009 in a state without a personal-income tax, fell 10 percent last year."

From an estate planning perspective then, this raises the question of whether or not Florida will continue to be the "go to" state when recommending residency change from New Jersey as a way to reduce estate taxes.  Florida may need to change its revenue generation model, by raising sales tax, raising property tax, adding income tax, bringing back the intangibles tax, or some other manner that makes it more expensive to be a Florida resident.


Guardians for Children - A Good Result from the Michael Jackson Circus

Over the past several weeks I have gotten a number of calls that started this way "I don't need an estate plan, but I need to name Guardians for my kids - the Michael Jackson situation got me thinking."

Unfortunately, the term "estate planning" is off-putting; many people think they need to have loads of money to have an "estate plan". All that you need to benefit from an estate plan is something that you want to protect - that could be your business, your money from taxes, your charitable goals, or your children.

A basic estate plan consists of a Will (who gets my stuff when I die and how do they get it), a Financial Power of Attorney (who can make financial decisions for me if I can't), and a Health Care Power of Attorney (who can make medical decisions for me if I can't). 

A Will is the only place you can name Guardians for your minor children.  The ONLY place.  So, everyone with kids needs an "estate plan" because they need a Will.  

Think about all the decisions you make for your children every day.  Shouldn't you take action to determine who would make those decisions if you can't? Who would communicate your values to your children?  Who would make sure they have the life experiences when they are young that are important to you?

I'm not saying its an easy decision in all instances - family situations are difficult.  I am saying you should never leave it up to a judge you never met and who doesn't know you or children to figure our who the person who raises them should be.

Annuity Purchased by Spouse Tarnished in NJ - But is There Light from Other State's Analysis

My colleague Donald D. Vanarelli has a great post at The Law Offices of Donald D. Vanarelli Blog about how Ohio and Massachusetts have taken a different approach to whether or not an Medicaid Qualifying Annuity purchased by a Community Spouse is considered an Available Asset of a Community Spouse.

The Deficit Reduction Act of 2005 (DRA) addresses situations where the purchase of an annuity can be Medicaid Compliant and the value of the annuity not deemed to be an available asset to the Community Spouse.  Regardless, as Don points out:

As I blogged here, the New Jersey appellate court, in N.M. v. Division of Medical Assistance and Health Services, 405 N.J. Super. 353  (App. Div. 2009), certifden., 199 N.J. 517 (2009), held that an annuity purchased for the sole benefit of the community spouse after the effective date of the Deficit Reduction Act of 2005 (DRA) may be considered in determining whether the resources of the institutionalized spouse exceed the resource limit for Medicaid eligibility. This case is one of major importance in the Medicaid estate planning area, and it is a major setback for those trying to help couples protect sufficient assets for the community spouse to live on when the ill spouse is institutionalized. However, based upon recent case law developments in other states, it appears that the New Jersey court’s analysis in the N.M. case may be less persuasive than anticipated. In that regard, courts in Ohio and Massachusetts have recently ruled, contrary to the court in New Jersey, that a community spouse’s annuity purchase is not an improper transfer.

But an Ohio and Massachusetts Court have looked at similar facts and reached different conclusions.  Notably the Ohio appeals court considered and rejected New Jersey's analysis in N.M.:


Significantly, the Ohio appellate court in the Vieth case considered, but refused to follow New Jersey’s N.M. case, instead finding “more reasonable the interpretation and analysis” of the applicable federal statute set forth in the federal district court case entitled Weatherbee v. Richman, 595 F. Supp. 2d 607 (W.D. PA 2009), which held that a post-DRA annuity purchased for the community spouse is exempt for Medicaid eligibility purposes. I blogged about the Weatherbee v. Richmancase here.


Given that the treatment of annuities is set forth in federal law, perhaps these cases will lend weight to a revised interpretation in annuities in New Jersey that is in fact consistent with the law.

Compare Nursing Homes

Medicare.gov site Flag Logo 


The Federal Health and Human Services Agency, which administers Medicare and Medicaid, has a fabulous Nursing Home Compare Tool.   The Tool has detailed information and ratings about every Medicare and Medicaid certified nursing home in the country (a actual good use of federal tax dollars in my opinion).  

You can search for nursing homes by name or geography.  The search results are then rated on a scale of 1 to 5 stars (with 5 being the highest).  You can compare up to 3 nursing homes side by side with detailed information on the facilities, staffing, health inspections, and quality measures.

A search within 10 miles of me shows 20 nursing homes.  Of those, the following 5 facilities have an overall rating of 5 out of 5 stars, demonstrating that they are much above average:



Charities as Victims of Cash for Clunkers?

Are Charities going to be Victims of Cash for Clunkers asks Kay Bell of Don't Mess With Taxes.

The Cash for Clunkers program (officially CARS for  Car Allowance Rebate System ) has been hugely popular. Old gas guzzlers are being traded in for new cars that have a $4500 rebate.  An additional $2 billion was added to the program last week.

Quick Aside - $2 billion is the same as $2,000,000,000.00 - ALWAYS write out the zeros when talking about how the government is spending YOUR dollars - looks quite a bit larger now, doesn't it?  At $4500 a car, that is 44,444 additional new cars being purchased.

The program requires that the "Clunkers" are junked by having liquid silicate poured into the engine, so that it is irreparably destroyed.  These cars will then be sold for scrap (and I won't go into the pros and cons of the environmental effects of that).

The problem?  Many charities rely on donations of old cars as an ongoing revenue source.  For example, Bell says:

Animal Services of Thurston County, Wash., depends on up to $20,000 in donations each year from Northwest Charity Donation Service. The service, in turn, relies on donated cars.

But since the Cash for Clunkers program began this summer, the nonprofit's source of funding is drying up, reports King 5 News in Seattle.

These are the same charities that have already lost scores of other funding sources as a result of individuals reducing contribution due to the stock market drop, corporations redlining excesses in the budgets due to the recession, and foundations staggering under market and Madoff type unanticipated losses.  So, score 1 for the car industry, and another negative for the charities that are using private dollars to address some of the staggering needs of the less fortunate.

Can a Medicaid Annuity be the Answer?

Home In today's USA Today, Matt Kranz answers a question about asset protection:

Q: My father may be put into a nursing home and would like to protect his investments, including his home and $250,000 in cash and stocks. Is there a way to do this?

Matt's first point is a good one, "In hindsight, the best thing to have done would have been to start planning farther ahead. "  However, the reality is that most families don't see the need for or value in asset protection planning until the crisis is upon them.  Then families ask the question posed above.

So what is to be done in this situation?  One solution Matt speaks about is combining a gift and a "Medicaid Annuity".  I have detailed the concept below.  The problem?  While Medicaid Annuity planning may be effective in California, it is of very limited used her in New Jersey.  In the recent case of N.M. v. Div. of Med. Assistance & Health Services the court found that New Jersey may consider as a countable resource the value of the income stream from a "Medicaid Annuity" purchased by a community spouse. An excellent summary of the case can be found on Don Vanarelli's blog.

If a Medicaid Annuity worked in New Jersey for asset protection planning, this is what it might be structured as:

Otherwise, [Michael Gilfix of elder law specialists firm Gilfix & La Poll Associates of Palo Alto, Calif.] [suggests your father might consider trying to protect some assets by using a combination of an annuity and gifts. Let's assume the cost of a nursing home is $5,000 a month and your father's monthly income is $1,000 including Social Security. With the $250,000 cash in the estate, your father might give a gift of $125,000 to a relative. That exceeds the $13,000 annual exclusion for gifts. However, your father could avoid gift tax on the $125,000 by claiming $112,000 of his $1 million lifetime gift tax exclusion, Gilfix says. He would need to file a 709 gift tax return with the IRS.

The $125,000 gift would make your dad ineligible for Medicaid reimbursement for 22 months, Gilfix estimates. So, with the remaining $125,000 in the estate, your father could buy an annuity with a 22-month term so it pays $4,000 a month.

Your father would qualify for Medicaid, since there would be no assets in the estate. And the annuity would cover the cost of the nursing home for 22 months. After that time, your father would qualify for Medicaid. Meanwhile, the $125,000 gift would be protected, Gilfix says.


NJ Medicaid Key Figures - Starting July 2009

New Jersey Department Human Resources

The key figures for Medicaid eligibility are updated frequently.  These figures will determine if a person qualifies for long term health care to be paid under Medicaid, as well as what assets a spouse can maintain if one spouse enters a nursing home.  These figures change frequently, some on an annual basis as a result of inflation, and other by administrative action.  Unfortunately, they are not broadcast by the Department of Human Resources as frequently.  Here is where they stand as of July 2009:

New Jersey Medicaid Reference – July, 2009

Minimum Community Spouse Resource Allowance


Maximum Community Spouse Resource Allowance


Resource Allowance for an Individual


Resource Allowance for a Couple

(both husband and wife in a nursing home)


Minimum Monthly Maintenance Needs Allowance


Maximum Monthly Maintenance  Needs Allowance


Monthly Personal Needs Allowance


Shelter Standard


Standard Utility Allowance

$411.00 – heating

$251.00 – non-heating

$29.00 – telephone

Divestment Penalty Divisor


Income Cap Amount


Home Equity Limit





Obama Needs to Turn to Taxes

Tax Forms for ConcernIn reviewing the Obama administration's first 200 days, CNN Money correctly predicts that the next 200 days will bring and shift to taxes.  Regardless of where we end up on health care, where is all the money going to come from for all the hundreds of billions ($X00,000,000.00's) that have already been spent?

Some thoughts:

  • New Health Care cost related taxes will be in the works - somebody will need to pay.  Could be reduction in itemized deductions for certain income earners, surcharge to income earners, additional taxes to insurers, or reduction of the tax free nature of employer provided benefits.
  • Extend the estate tax for at least one year at the current levels of $3.5 million exemption per person and 45% maximum bracket.  They won't let the estate tax expire in 2010.  The question is if they will push one year, or just make it permanent at existing levels to not have to address again in 2010.
  • Closing "Corporate Tax Loopholes" - This may be combined with a rate reduction.  The thought is the certain provisions make it less expensive to operate offshore.  The goal would be to make it more expensive to operate offshore, but create an incentive to operate, and thereby employ in the US, so the tax revenue effect may be flat.


When do I need to look at my Wills again?

Category: Estate Planning

Congratulations! Unlike the vast majority of Americans, you have a Last Will and Testament. You have created an appropriate distribution scheme to take into account your family, assets, and goals. Now what?

To continue to fit your needs, a Last Will and Testament, and indeed your entire Estate Plan, need to evolve over time. Not only does the law change, but you change - your family situation, your financial situation, your goals.

Courtesy of Florida Estate Planning Lawyer Blog, here is a list of those occurrences that should trigger you looking at your Wills again:

All of this should be reviewed on a regular basis and always when one of
the following happens:
(1) Marriage, divorce, death of spouse.
(2) Birth of a child.
(3) Children become financially independent.
(4) Birth of a grandchild.
(5) New business venture.
(6) Substantial growth in your business.
(7) Job promotion.
(8) Retirement.
(9) Purchase of life insurance.
(10) Move to a different state.
(11) Substantial increase or decrease in wealth.
(12) Decision to make large charitable gifts.
(13) Increase in risk of being subject to a lawsuit.
(14) Substantial amounts of property are in joint names.
(15) You purchase real property (including a time share) in another state.

Even if none of these have happened recently, an estate plan needs a "check-up" every 3-5 years. What does this mean? Get our your copy of your documents and read them. If they don't match your recollection, or are no longer appropriate (you no longer have a relationship with your successor executor for example) make whatever changes are needed so your Will and Estate Plan continues to fit you.

What is the Value of Chamber Membership?

In today's new economy, many businesses are seeking new markets. One traditional avenue of business development that is enjoying a resurgence is becoming a member of the local business community by joining a local Chamber of Commerce.

Wikipedia defines a Chamber of Commerce as "[A] form of business network, e.g., a local organization of businesses whose goal is to further the business interests of the community. 

Generally, chambers of commerce serve the following purposes:

  • Creating a strong local economy
  • Promoting the community
  • Providing networking opportunities
  • Speaking with government on behalf of business
  • Political action, such as getting pro-business candidates elected to office"

What can your local Chamber do for you?  The Morris County Chamber of Commerce has developed a video (courtesy of Grey Sky Films) talking about the benefits of Chamber membership. I guess the fact that the video but features me underscores the value of my clients have found with Chamber membership!