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Should I Get a Divorce to Protect My Spouse from Medical Debt in Probate
Probate Court

Should I Get a Divorce to Protect My Spouse from Medical Debt in Probate

Probate is the process for administering an estate. If you are married, the last thing you want is to stick your spouse with your medical debt. Good planning will ensure that the spouse will not be saddled with your medical bills in probate.

nj.com’s article asks “Will getting a divorce protect my spouse from my medical debt when I’m dead?” According to the article, the factors to consider include details on the couple’s assets, income and debts, the existence of a will and/or other estate planning documents and the amount and nature of the medical expenses.

There are a few medical expenses of a deceased spouse, for which the other spouse may be liable. The nature of the medical debt is relevant, in addition to the amount, in the Garden State.

In addition, whether the would-be deceased spouse has a will and the extent of his or her estate is also an important factor. If the estate assets are insufficient to pay all debts of the estate in full, it is possible that medical debt may not be paid at all. For example, New Jersey’s applicable statute—N.J.S. 3B:22-2—states the debts in order of priority to be repaid when the estate assets are not enough to pay all claims in full:

  • Reasonable funeral expenses;
  • Costs and expenses of administration;
  • Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults;
  • Debts and taxes with preference under federal law or the laws of New Jersey;
  • Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him;
  • Judgments entered against the decedent according to the priorities of their entries respectively; and then,
  • All other claims.

There are also some concerns as to whether this type of Medicaid planning, or Medicaid divorce, may raise potential implications of fraud. Before acting, speak with a knowledgeable estate planning attorney who practices in this area.

Learn the ins and outs of probate.

Reference: nj.com (May 16, 2019) “Will getting a divorce protect my spouse from my medical debt when I’m dead?”

Common Estate Planning Mistakes to Avoid
Avoid Critical Estate Planning Mistakes

Common Estate Planning Mistakes to Avoid

Estate planning attorneys see them all the time: the mistakes that people make when they try to create an estate plan or a will by themselves. They learn about it, when families come to their offices trying to correct estate planning mistakes that could have been avoided just by seeking legal advice in the first place. That’s the message from the article “Five big estate planning ‘don’ts’” from Dedham Wicked Local.

Here are the five estate planning mistakes that you can easily avoid:

Naming minors as beneficiaries. Beneficiary designations are a simple way to avoid probate and be certain that an asset goes to your beneficiary at death. Most life insurance policies, retirement accounts, investment accounts and other financial accounts permit you to name a beneficiary. Many well-meaning parents (and grandparents) name a grandchild or a child as a beneficiary. However, a minor is not permitted to own an asset. Therefore, the financial institution will not name the minor child as the new owner. A conservator must be appointed by the court to receive the asset on behalf of the child and they must hold that asset for the minor’s benefit, until the minor becomes of legal age. The conservator must file annual accountings with the court reflecting activity in the account and report on how any funds were used for the minor’s benefit, until the minor becomes a legal adult. The time, effort, and expense of this are unnecessary. Handing a large amount of money to a child the moment they become of legal age is rarely a good idea. Leaving assets in trust for the benefit of a minor or young adult, without naming them directly as a beneficiary, is one solution.

Drafting a will without the help of an estate planning attorney. The will created at the kitchen table or from an online template is almost always a recipe for disaster. They don’t include administrative provisions required by the state’s laws, provisions are ambiguous or conflicting and the documents are often executed incorrectly, rendering them invalid. Whatever money or time the person thought they were saving is lost. There are court fees, penalties and other costs that add up fast to fix a DIY will.

Adding joint owners to bank accounts. It seems like a good idea. Adding an adult child to a bank account, allows the child to help the parent with paying bills, if hospitalized or lets them pay post-death bills. If the amount of money in the account is not large, that may work out okay. However, the child is considered an owner of any account they are added to. If the child is sued, gets divorced, files for bankruptcy or has trouble with creditors, that bank account is an asset that can be reached.

Joint ownership of accounts after death can be an issue, if your will does not clearly state what your intentions are for that account. Do those funds go to the child, or should they be distributed between heirs? If wishes are unclear, expect the disagreements and bad feelings to be directly proportionate to the size of the account. Thoughtful estate planning, that includes power of attorney and trust planning, will permit access to your assets when needed and division of assets after your death in a manner that is consistent with your intentions.

Failing to fund trusts. Funding a trust means changing the ownership of an asset, so the asset is owned by the trust or designating the trust as a beneficiary. When a trust is properly funded, assets funding the trust avoid probate at your death. If your trust includes estate tax planning provisions, the assets are sheltered from estate tax at death. You have to do this before you die. Once you’re gone, the benefits of funding the trust are gone. Work closely with your estate planning attorney to make sure that you follow the instructions to fund trusts.

Poor choices of co-fiduciaries. If your children have never gotten along, don’t expect that to change when you die. Recognize your children’s strengths and weaknesses and be realistic about their ability to work together, when deciding who will make financial decisions under a power of attorney, health care decisions under a health care proxy and who will best be able to settle your estate. If you choose two people who do not get along, or do not trust each other, it will take far longer and cost more to settle your estate. Don’t worry about birth order or egos.

The sixth biggest estate planning mistake people make, is failing to review their estate plan every few years. Estate laws change, tax laws change and lives change. If it’s been a while since your estate plan was reviewed, make an appointment to meet with your estate planning attorney for a review.

Learn about ways to avoid common estate planning mistakes.

Reference: Dedham Wicked Local (May 17, 2019) “Five big estate planning ‘don’ts’”

Will a Reverse Mortgage Help Me in Retirement?
Reverse Mortgage Can Help in Retirement

Will a Reverse Mortgage Help Me in Retirement?

It’s not uncommon for a homeowner to take out a home equity line of credit or borrow against an existing one. A reverse mortgage can provide the funds to pay some bills and stay afloat.

Another option if you’re at least 62 with a home that’s not heavily mortgaged, is to take out a reverse mortgage. A revere mortgage gives you tax-free cash. No repayments are due, until you die or move out of the house.

However, these loans are expensive. In addition, reverse mortgages aren’t for those people who want to give their home to heirs, because most or all of the home’s equity may be eaten up by the loan principal and interest.

Fed Week’s recent article entitled “Considerations for Borrowing in Retirement” explains that reverse mortgages work best for seniors who need cash, who want to stay in their homes and who have few other options.

These HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA). They let homeowners convert their home equity into cash with no monthly mortgage payments.

After getting a reverse mortgage, borrowers are still required to continue to pay property taxes and insurance. They also must maintain the home, according to FHA guidelines.

People use reverse mortgage loans to pay for home renovations, as well as medical and daily living expenses. Some homeowners who have an existing mortgage will use their reverse mortgage loan to pay off their existing mortgage and get rid of their monthly mortgage payments.

When the homeowner moves, sells the house, or passes away, the loan becomes due. If the house is held until death, heirs have the option to take out a conventional mortgage, pay off the reverse mortgage and continue to live there.

Other options include loans against your life insurance or your securities portfolio.

Ask a qualified estate planning attorney or elder law lawyer how a reverse mortgage might fit into your situation.

Learn how to protect your life savings from the cost of long-term care.

Reference: Fed Week (May 16, 2019) “Considerations for Borrowing in Retirement”