GO is for individuals who are eligible for a nursing facility level of care, but who wish to remain in their homes. To meet the nursing facility level of care, individuals with no cognitive deficits must require limited assistance with at least three activities of daily living, and individuals with cognitive deficits must require supervision with at least three activities of daily living. GO enrollees must also meet income and asset requirements. Additionally, GO participants agree to allow the county and the state to enter the participant’s home in order to monitor the services provided. This program is intended as a supplement to, not a replacement for, the assistance already being provided by family members, friends, and neighbors.

Care managers work with GO participants to create individualized plans of care based on the participant’s health care needs. Care managers do not provide direct services, such as transportation, medical care, social work, and therapeutic counseling.

GO was established as a participant-directed care program. With the help of the care manager, the participant is able to determine what services he or she needs, select providers of these services, and then ensure that the services are provided.

Eligibility

To be eligible for GO, an individual must meet all of the following criteria:
1. Resident of New Jersey
2. 65 years of age or older, or age 21-64 and physically disabled (as determined by the Social Security Administration or the Disability Review Section of the Division of Medical Assistance and Health Services)
3. Qualify for Medicaid financial eligibility

a. Qualify for SSI in the community, or
b. Qualify for Medicaid Only – Institutional Only, or
c. Qualify for New Jersey Care

i. Income at or below 100% of the Federal Poverty Level, i.e. $11,170/year for a family of 1 or $15, 130/year for a family of 2, and
ii. Resources at or below $4,000

4. Clinically eligible for a nursing facility level of care
5. Reside in an approved community living arrangement

Individuals who are under 21 or who are between 21 and 64, but who are chronically mentally ill, intellectually disabled, or developmentally disabled are ineligible for GO.

Services

Each participant is provided with an individualized Plan of Care (POC). This assessment is continually reviewed and is updated at least annually.

Description of Services Provided

GO waiver services include the following:
• Assisted Living/Adult Family Care
• Attendant Care
• Caregiver/Participant Training
• Care Management
• Chore Service
• Environmental Accessibility Adaptations
• Home Based Supportive Care
• Home-Delivered Meal Service
• Personal Emergency Response Systems (PERS)
• Respite Care
• Special Medical Equipment and Supplies
• Social Adult Day Care
• Transition Services and Transitional Care Management
• Transportation

GO participants must receive Care Management and at least one other of the above-
mentioned waiver services each month.

GO recipients are also eligible for New Jersey Title XIX Medicaid State Plan Services, which may include:
• Adult Day Health
• Advanced Practice Nurse
• Chiropractic
• Clinic
• Dental
• Hearing Aid
• Home Health
• Hospital
• Hospital Outpatient
• Laboratory
• Medical Supplies & Equipment
• Nursing Facility
• Optometric
• Optical Appliances
• Personal Care Assistant
• Pharmaceutical
• Physician
• Podiatric
• Prosthetic & Orthotic Devices
• Rehabilitation Therapies
• Transportation

Description of Service Providers

Services may be provided by:
1. Traditional Medicaid community agencies
2. New qualified non-traditional entities
3. Qualified Participant-Employed Providers (PEPs)

Service providers must meet New Jersey qualification requirements, which have also been approved by the federal government.

Options

GO enrollees are provided with two specific opportunities to direct their own services: access to the Personal Preference program or utilization of Participant Employed Providers.

Personal Preference

Participants who are eligible for Medicaid Personal Care Assistant services can direct their own care. The participant will work with a fiscal management consultant to develop a cash management plan, through use of a monthly cash allowance. The participant determines the services needed and the entities he or she wishes to hire. Even with this option, the participant is still required to need and receive at least two waiver services monthly, one of which is care management.

Participant Employed Providers

A participant who is either capable of self-directing his or her own care or who has a legally responsible representative/relative who can act on his or her behalf may hire a Participant Employed Provider (PEP) as an employee for certain services. These services include transportation, chore, and home-based supportive care. Additionally, participants who are capable of self-directing their own care can hire a PEP for attendant care, as long as this has been previously authorized and evaluated by a registered nurse. A participant’s spouse, legally responsible relative, guardian, active power of attorney, or authorized representative may not be a service provider. New Jersey’s billing agent acts as the participant’s payroll and fiscal agent to fulfill all tax obligations, etc. that accompany the participant’s role as an employer.

Limits

There are limits to the amount, frequency, and length of time for each service. Additionally, services must be cost-effective. As previously mentioned, services are designed to supplement, not replace, the assistance already in place from family members, friends, and neighbors. The GO program also cannot be used to pay for services currently paid for privately or through another program. Further, GO services are not available while an individual is an inpatient at a hospital or nursing home. Prior authorization may be required for certain services.

New Jersey sets the rates that agencies are paid. Payments are made directly to service agencies. Money is never distributed to participants or caregivers. Finally, Medicaid is considered the payer of last resort.

Cost Share

Most GO recipients are not charged a co-pay. However, GO participants who live in an Assisted Living facility or an Adult Family Care home are always responsible for paying room and board fees. In addition, these particular GO participants may also have a cost share, based on his or her monthly income.

Disenrollment

GO is a voluntary program so participants can withdraw at any time. Alternately, a participant may be disenrolled for a variety of reasons, including if he or she no longer meets the financial or clinical eligibility criteria, if he or she moves out of New Jersey, if he or she moves into a nursing facility, if he or she is enrolled in another Medicaid Waiver or in the Program of All Inclusive Care for the Elderly (PACE), if he or she cannot be contacted or located for two months, etc.

Recourse

A GO participant has the right to request an in-person fair hearing provided by the Office of Administrative Law if he or she is determined ineligible for continued enrollment or denied waiver services or chosen providers, or if waiver services are suspended, reduced, or terminated. The state will provide 30 days’ notice of termination of benefits unless the reason for disenrollment is that the participant has moved out of the state or that the provider has committed an act subjecting it to disbarment under state or federal law. Once provided written notice of the action, the participant must request the fair hearing within 20 days of the date of the letter. Medicaid benefits may continue until a hearing decision is reached; however, if the hearing decision is not in the participant’s favor, the participant may be required to repay the cost of benefits that he or she was not entitled to receive.

The Federal Deposit Credit Union (FDIC) and the National Credit Union Share Insurance Fund (NCUSIF) insure banks and federally-insured credit unions, respectively.  The FDIC, established in 1933 as an independent agency, insures all deposit accounts, including checking and savings accounts, money market deposit accounts, and certificates of deposit, placed in banks and savings associations, but it does not cover stocks, bonds, mutual fund shares, life insurance policies, annuities, or securities.

If a member bank fails, the FDIC insures all depositors at that institution against loss up to a certain dollar limit.  The current standard FDIC insurance amount is $250,000 for each depositor, per insured bank, for each account ownership category.  From December 31, 2010 through December 31, 2012, deposits held in noninterest –bearing transaction accounts at all FDIC-insured institutions will be fully insured regardless of the amount in the account. http://www.fdic.gov/deposit/deposits/dis/index.html.  The NCUSIF was established by Congress in 1970 through the National Credit Union Administration (NCUA).  On July 22, 2010, lawmakers signed the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Dodd-Frank permanently established the NCUA’s standard maximum share insurance amount at $250,000.  http://www.ncua.gov/DataApps/Pages/SI-NCUA.aspx.  Both the FDIC and the NCUSIF are backed by the full faith and credit of the United States government.

The FDIC Deposit Insurance Coverage Limits are as follows:

Both the FDIC and the NCUSIF offer online calculators to assist you in determining if your accounts are fully insured.

FDIC:            http://www.FDIC.gov/edie.

NCUSIF:        http://www.ncua.gov/DataApps/Pages/SI-Tools.aspx.

Custodial Accounts

The Securities Investor Protection Corporation (SIPC) was created by Congress in 1970. Not every investor is protected by the SIPC, and the SIPC does not offer investors the same protection that the FDIC offers to bank depositors.  Instead of bailing out investors when the value of their investments falls, the SIPC instead assists individuals whose money, stock, or securities are stolen by a broker or put at risk if a brokerage fails.  When a brokerage firm fails owing customers cash and securities that are missing from customer accounts, the SIPC petitions a federal court for the appointment of a trustee to liquidate the firm to protect its customers.  The SIPC protects cash, stocks, and bonds, but does not protect commodity futures contracts, fixed annuity contracts, currency, and investment contracts that are not registered with the SEC.  The SIPC does not cover individuals who are sold worthless stocks, etc.

Customers of a failed brokerage firm receive back all stocks and bonds that are either already registered in their names or are in the process of being registered in their names.  Then, the firm’s remaining customer assets are divided on a pro rata basis with funds shared in proportion to the size of claims.  If sufficient funds are not available to satisfy the claims, the reserve funds of the SIPC supplement the distribution, up to $500,000 per customer, including a maximum of $250,000 for cash claims.  Usually, the financial worth of a customer’s account is calculated as of the “filing date.”  If possible, the actual stocks, etc. owned by a customer are returned to the customer.  If necessary, reserve funds will be used to purchase replacement securities, which could possibly result in the decreased or increased value of these securities.

I am often asked to explain the advantage of consulting with an attorney instead of purchasing cheaper Internet-based documents.  The low cost and instantaneous production of these documents are a dead giveaway that they are a less than adequate substitute for an effective estate plan.  Online estate planning programs range in cost from $19.95 to about $250.  A typical consultation fee with an attorney is more than the most expensive online estate plan.  These online estate plans can take as little as 15-30 minutes to complete.  A consultation with an estate planning attorney lasts at least an hour, if not two hours.  The attorney takes the time to investigate your unique circumstances, and then spends time after your consultation to work out all of the important details of your customized estate plan to ensure that it achieves your goals.  Compare this personal attention to some sort of unknown algorithm that produces a one size fits all estate plan within a matter of minutes.

A software or Internet-based program is unable to think for you like a lawyer can.  Rather than create custom documents that fit your own unique needs, such programs might possibly be adequate for only an extremely small segment of the population who fits into a standard set of criteria: owns little to no property in one state, has a very small amount of savings or investments, and has a very traditional family tree.  Further, even though many people think that they automatically fit into these criteria, an attorney will listen to your story and notice complications you may not even realize exist.

There are multiple reasons why consultation with an attorney is a far superior method of creating an estate plan than a consultation with your computer.  First, there are 50 different sets of state laws in this country; each state has its own slightly (or vastly) different requirements for handling estates.  Not all online programs take into consideration the state in which you live or the states in which you may own additional property.  Further, states like New Jersey and Pennsylvania operate under what is known as a common law scheme, while a minority of states, including California, operate under community property laws.  These are two vastly different property schemes, so a program designed for individuals in community property states will likely prove ineffective for individuals living in common law states.

Relatedly, some software programs may provide all of their users with a living trust, regardless of each individual’s circumstances.  Living trusts are extremely effective if used appropriately.  However, they are not necessary, or even suitable, for a large majority of the population.  Living trusts have two important purposes.  First, they afford privacy.  A living trust is used in tandem with a “pour-over” will, which simply provides that the individual’s estate will be disposed of through a living trust.  When a will is admitted to probate, it becomes a public document, so a “pour-over” will, which does not detail how and to whom your estate is distributed, affords privacy to the decedent.  Then, your living trust, a private document, details the particulars of your estate’s disposition.  The second reason to have a living trust is if you own property in more than one state.  For example, if a vacation home in North Carolina or Florida is owned in your name individually or in you and your spouse’s names jointly, your executor must probate your will in each state where you own property.  This process is especially time-consuming and knotty in certain states, including Florida, where the probate laws are extremely tedious, and the courts are heavily involved.  Titling all of your out-of-state property into a living trust effectively avoids this hassle of probating in multiple states.  If neither of these goals, privacy or avoiding probate in multiple states, applies to your situation, then a living trust is likely not appropriate for you.  A lawyer can easily make this determination; however, a computer program might not be so savvy.

An online program might not be able to ascertain and deal with the implications of leaving all of your property to your spouse.  Estates of a certain size are taxed on both federal and state levels.  The New Jersey estate tax threshold is $675,000.  The federal estate tax threshold is currently $5,120,000; however, if Congress does not act before 2013, the federal exemption will drop to $1,000,000, and the tax rate will increase to 55%.  This decrease in the federal tax threshold will potentially affect a much larger portion of the population.  It will be important for those affected to create an estate plan that utilizes disclaimer trusts so that, upon the first spouse’s death, the survivor can “disclaim” any or all assets of the deceased spouse in order to avoid or lessen the tax burden.  However, creating disclaimer trusts is just the first step.  To make the disclaimer trusts effective, a couple must retitle certain assets in order to equalize each spouse’s estate.  It will be important to drastically reduce the amount of assets held jointly, and it will be necessary to ensure that each spouse has a roughly equal amount of assets in his or her individual name in order to be able to disclaim enough assets to save taxes.  Further, beneficiary designations on life insurance, retirement accounts, etc. must be changed in order for disclaimer trusts to work effectively.  A computer program will not be able to offer advice on how to retitle assets and change beneficiary designations, and a disclaimer trust will serve no purpose if assets are not titled properly.

Further, many individuals in this society have been married two, or even three, times.  They often have children from their prior marriages.  Couples in this situation will definitely need to seek the counsel of an attorney to ensure that their plans play out according to their wishes.  Most people wish to provide for their spouse upon death, but upon that spouse’s death, they may want their remaining estates to be left only to their children from prior marriages, not to their spouse’s children.  There are many different methods for accomplishing these goals that a computer program will not be able to achieve adequately.

Estate plans for parents of minor children are extremely important.  If both spouses die, and all of their assets are left outright to their minor children, instead of to a trust, those assets will be held with the court until the child reaches 18.  Further, if a child has special needs, his or her inheritance should be left in a special needs trust, which is a specific, restrictive trust that will ensure that public benefits are not jeopardized.

Moreover, many individuals often choose executors, trustees, and agents under powers of attorney based on irrelevant categories, e.g. the oldest child, the only son, etc.  An attorney can provide thought-provoking advice as to the most effective and appropriate choice of agents.

Finally, and most importantly, having an attorney draft your estate plan provides peace of mind that all of your concerns have been taken into consideration, and provisions have been made for many contingencies. You will rest assured that your wishes will be carried out.

Moorestown, NJ – New Jersey elder law attorney Thomas D. Begley, Jr. marks 2012 with a 15th anniversary celebration of receiving the Martindale-Hubbell® AV® Preeminent™ rating. The AV Preeminent rating shows that his peers have nominated him for the highest standards in both his ethical behavior and quality of his legal work for 15 years.

“I am honored to receive this distinction for 15 years in a row,” said Thomas D. Begley, Jr., of the Begley Law Group P.C. “My passion is to use the law to provide the communities of southern New Jersey and Philadelphia with solid legal advice.”

The Martindale-Hubbell process involves a strenuous peer review that evaluates lawyers within a practice area for their professional ability and ethics. Begley has received a 5.0 out of a possible 5.0 score for the AV Preeminent rating, the highest possible score. His peers see him as a leader in elder law, estate planning, personal injury settlement consulting, and disability law.

Begley’s legal career has spanned many decades as a Certified Elder Law Attorney. He is a
National Academy of Elder Law Attorneys Fellow and founding member and past president of the Special Needs Alliance. He has received the Marilyn Askin Lifetime Achievement Award, the NAELA President’s Award and the Alfred E. Clapp Award.

“Every day I enjoy helping individuals and families make smart decisions for their lifelong wishes and assist them to achieve more through the law,” said Begley. “The true testament to my success is that I can give people peace of mind that their most valued possessions and directives are securely in place.”

The exemptions from the SSI transfer penalty track the Medicaid penalty exemptions. They include: transfers between spouses,⁵ transfers “for the sole benefit of” the spouse,⁶ transfers to a trust established solely for the benefit of the transferor’s child who is blind or disabled,⁷ and transfers to (d)(4)(A) and (C) trusts.⁸  The transfer of a home to a spouse,⁹ a minor or disabled child,¹⁰ a sibling who has an equity interest and has lived in the home for at least one year,¹¹ and a caregiver child¹² are all exempt.

The transfer penalty may be waived under circumstances similar to the Medicaid waiver, i.e., the recipient intended to dispose of the assets at fair market value, ¹³ the transfer was made exclusively for purposes other than to qualify for SSI, ¹⁴ all of the transferred assets are returned, ¹⁵ or undue hardship.¹⁶ Note that, in Medicaid planning, a penalty is reduced if there is a partial return of assets.  Under the statute for SSI, all of the assets must be returned.

The statute also tracks the Medicaid rules concerning jointly-owned assets.  A resource held by an individual with another person or persons in a joint tenancy, tenancy in common, or similar arrangement, is considered disposed of by the individual when an action is taken, either by the individual or by any other person, that reduces or eliminates the individual’s ownership or control of such resource.¹⁷

A number of issues remain.  Is the transfer of income subject to a Medicaid transfer penalty?  The term “resource” apparently does not include income.¹⁸ Since the transfer penalty applies to the transfer of resources, it apparently does not apply to the transfer of income.  If an SSI recipient receives an inheritance or a recovery from a personal injury settlement, it is income in the month received.  If the SSI recipient transfers the income in the month received, is there a Medicaid transfer penalty?

An interesting difference between the Medicaid rules and the SSI rules is that there is a 3-year look back for transfers under SSI and a 5-year look back for transfers under Medicaid.

I.          2012 FIGURES

            A.         Medicaid

$2,094             Income Cap[1]

$113,640         Maximum Community Spouse Resource Allowance (CSRA)[2]

$22,728           Minimum CSRA[3]

$2,841             Maximum Minimum Monthly Maintenance Needs Allowance[4] (MMMNA)

$1,891.25        MMMNA (July 1, 2012 until June 30, 2013)[5]

$567.37           Excess Shelter Allowance (July 1, 2012 until June 30, 2013)[6]

$2,000             Maximum Resource Limit (individual)[7]

            B.        Social Security

3.6%                For 2012 there has been a 3.6% increase for Social Security Benefits[8]

$2,513             The Maximum Social Security benefit for a single individual for 2012[9]

$698                Supplemental Security Income (SSI) – Single[10]

$1,048             Supplemental Security Income (SSI) – Couple[11]

$350                Supplemental Security Income (SSI) – Essential Person[12]

$8,386.75        Maximum Annual SSI benefit – Single[13]

$12,578.71      Maximum Annual SSI benefit – Couple[14]

$1,010             Substantial Gainful Activity (SGA) – Disabled[15]

$1,690             SGA – Blind[16]

7.65%              Tax Rate Employee[17]

15.30%            Tax Rate Self Employed[18]

$720                Trial Work Period[19]

$110,100         Maximum Social Security Wage Base[20]

$1,130             Quarter of Coverage[21]

            C.        Medicare

                    1.         Part A

$144.50           Medicare Co-Payment – Skilled Nursing Facility (SNF)[22]

$1,156             Hospital Deductible[23]

$289                Per day/Co-Insurance Day 61 -90[24]

$578                Per day/Co Insurance Day 91-150[25]

Part A Premium (for voluntary enrollees only)

$248/mo     With 30-39 quarters of Social Security coverage[26]

$451/mo     With 29 or fewer quarters of Social Security       coverage[27]

                    2.         Part B

$140                Medicare Part B Deductible[28]

$99.90             Standard Part B Premium[29]

Medicare Part B – Single or Married and Filing Separate Return

Part B Income-Related Premium[30]

In addition, the monthly premium rates to be paid by beneficiaries who are married, but file a separate return from their spouse and lived with their spouse at some time during the taxable year are:

Standard Part D Cost-Sharing for 2012[31]

$320                Deductible

$2,930             Initial Benefit Period

$3,727.50        Donut Hole Threshold

$4,700             Total Covered Part D Drugs to Get to Catastrophic Limit (Patient and Plan)

$2.60               Catastrophic cost-sharing:  Generic

$6.50               Catastrophic cost-sharing:  Brand

          D.        Tax

$13,000           Annual Gift Tax Exclusion[32]

$139,000         Gifts to Non-Citizen Spouse[33]

$11,650           Income Level/Maximum Tax Estates and Trust[34]

$388,350         Income Level/Maximum Single Individual Income Tax[35]

$5,120,000      Federal Estate Tax Exemption[36]

$3,800             Personal Exemption[37]

$1,800             FICA Wage Threshold[38] Domestic Workers

$7,000             FUTA Wage Base[39]

$5,000            Maximum IRA Contribution[40]

$1,000             “Catchup” IRA Contribution[41]

$101,000         Applicable Allowable Limit Roth IRA Single Taxpayer[42]

$159,000         Applicable Allowable Limit Roth IRA Married Taxpayer Filing Jointly[43]

          E.         Long-Term Care Insurance

$310                Exclusion from income taxation of daily LTC insurance benefits[44]

Tax Deduction of LTC Premium[45]

$350                40 years old or less

$660                41 to 50 years old

$1,310             51 to 60 years old

$3,500             61 to 70 years old

$4,370             more than 70 years old

           F.         Standard and Poor’s 500 Index

2.27% average S&P dividend yield November 25, 2011.[46]

           G.        Veterans Aid and Attendance/House-Bound Benefits[47]

                    1.         Aid and Attendance 

$1,703 per month       Veteran with no dependents

$2,109 per month       Veteran with one dependent

$1,094 per month       Spouse of deceased Veteran with no dependent

$1,345 per month       Spouse of deceased Veteran with one dependent

                     2.         House-Bound Benefits

$1,248 per month       Housebound Veteran, no dependents

$1,564 per month       Housebound Veteran, one dependent

$837 per month          Housebound spouse of deceased Veteran, no dependent

$1,048 per month       Housebound spouse of deceased Veteran, one dependent

II.        EXPLANATION OF TERMS

            A.        Medicaid

1.         Income Cap.  Many states use an income cap to determine eligibility for some or all Medicaid Programs.  These are known as income cap states.  Generally the income cap is calculated at 300% of the maximum federal SSI benefit rate for a single individual.[48]

2.         CSRA.  The Medicaid Catastrophic Coverage Act (MCCA)[49] was designed to avoid impoverishing a community spouse where one spouse is institutionalized.  Some states permit the community spouse to retain all countable resources up to the maximum CSRA.  Other states permit the community spouse to retain one half of the countable resources not to exceed to maximum CSRA and to retain all countable resources up to the minimum CSRA.[50]

3.         MMMNA.   Under MCCA, the Community Spouse is entitled to a Minimum Monthly Maintenance Needs Allowance.[51]  If the income of the Community Spouse falls below the MMMNA, the Community Spouse can retain income from the Institutionalized Spouse to bring the Community spouse up to the MMMNA. Some states permit the Community Spouse to keep all of the income up to the Maximum MMMNA.  In other states, the MMMNA is made up to two components, the basic allowance and the excess shelter allowance.

4.         Excess Shelter Allowance.  Excess Shelter Allowance is calculated by totaling the Shelter Expenses of the Community Spouse.  These expenses are limited to rent, a mortgage (including principal and interest), taxes and insurance, utility expenses, and maintenance charges for condominium or co-op.   Some states use a flat amount or amounts for the utility allowance.

5.         Maximum Resource Allowance.  Medicaid has a maximum resource allowance for single individuals of approximately $2,000.  SSI states follow SSI rules.  The SSI resource limit is $2,000 for an individual and $3,000 for a married couple when both apply for benefits.[52]

            B.        Social Security

1.         Cost of Living.  Social Security benefits are indexed to inflation and are adjusted annually to reflect increases in the cost of living.

2.         Maximum Social Security Benefit.  Social Security Benefits fall into three categories: Social Security Retirement, Social Security Disability Income (SSDI) and Supplemental Security Income (SSI).  Social Security Retirement and Social Security Disability Income (SSDI) are based on payments made into the Social Security System by wage earners during their working careers.  SSI is a welfare program.  There is a maximum Social Security Benefit for any single individual.  This is also adjusted annually.

3.         SSI Benefit.  There is a maximum federal benefit for SSI for single persons and a separate maximum for married couples.  Some states provide a state supplement to the federal benefit.  There is also a maximum annual SSI benefit.

4.         Substantial Gainful Activity.  To be eligible for either SSDI or SSI, the applicant must be disabled as defined in the Social Security Act.[53]  The statute references the applicant’s inability to perform “substantial gainful activity.”  Substantial gainful activity is the ability to earn more than a certain amount published by the Social Security Administration (SSA) on an annual basis.  There are two income levels to determine substantial gainful activity.  One is for the general population and one is for blind.

5.         Trial Work Period.  During a trial work period, a Social Security beneficiary receiving disability benefits may test his or her ability to work and still be considered disabled.  Social Security does not consider services performed during the trial work period as showing that the disability has ended until services have been performed in at least 9 months (not necessary consecutive months) in a rolling 60 month period.  Any month in which earnings exceed the trial work period amount is considered a month of service for the individuals trial work period.  The trial work period amount is adjusted annually.

6.         Social Security Wage Base.  There is a Social Security tax imposed on income up to the maximum Social Security Wage Base.  Income in excess of the wage base is not subject to the Social Security tax.[54]

7.         Insured Status.  To be eligible for Social Security Retirement Benefits or Disability Benefits, a worker must have insured status.  This means the wage earner must accumulate a certain number of quarters of coverage.  The wage earner is “fully insured” for life if he or she has 40 quarters of coverage.  The wage earner is currently insured if he or she has 6 quarters of coverage during a 13 quarter period ending with the quarter in which the person became entitled to benefits.  The amount of earnings required for a quarter of coverage is adjusted annually.

            C.        Medicare

1.         Medicare Part A.   Medicare is a medical insurance program that pays for a broad range of medical services.  Generally, Medicare Part A covers hospitalization and certain limited coverage in skilled nursing facilities as well as the first 100 days of home care and hospice benefits for the terminally ill.  There are premiums, co-payments, deductibles and maximums per spell of illness.[55]

2.         Medicare Co-Payment – Skilled Nursing Facility.  If a person is eligible for Medicare in a skilled nursing facility, Medicare pays the first 20 days in full but days 21 to 100, the Medicare recipient pays a co-payment and Medicare pays the balance.[56]

3.         Deductible.  Under Medicare Part A, Hospital coverage is limited to 90 days per spell of illness.[57] For 60 days there is a deductible which is adjusted annually.

4.         Co-Insurance.  For the next 30 days of hospitalization, the patient pays co-insurance of 25% of the deductible.[58]  For days 91 to 150 for spell of illness, utilizing “lifetime reserve days,” there is a co-payment of one half of the deductible.[59]

5.         Medicare Part B.   Medicare Part B covers physicians, diagnostic tests, medical equipment, ambulance services, outpatient physical and speech therapist, certain home care and prostheses.[60] Medicare Part B is available to persons over 65 years of age or eligible for Part A and who are receiving SSDI after two years.

6.         Medicare Part B Deductions.  There is a deduction for services covered by Medicare Part B.  The amount of the deduction is adjusted annually.

7.         Premiums.  Under Medicare Prescription Drug Improvement and Modernization Act of 2003 (Medicare Act of 2003), beneficiaries pay premiums depending on their income.  Premiums are adjusted annually.[61]

8.         Medicare Part D.  The Medicare Act of 2003[62] provides a prescription drug benefit known as Medicare Part D. To be eligible, individuals must be eligible for either Part A or Part B of Medicare. Individuals may obtain the prescription coverage either through a standalone prescription drug plan (PDP) or through a Medicare Advantage Plan (MA-PD).

            D.        Tax

1.         Annual Gift Tax Exclusion.  Tax payers are permitted to make gifts up to a certain amount each year without any gift tax consequences.  This is known as the annual gift tax exclusion.  The exclusion is indexed to inflation.[63]

2.         Gifts to Non-Citizen Spouse.  The estate and gift tax marital deduction is not allowed for transfers to a spouse or a surviving spouse who is not a U.S. Citizen.[64]  The concern is that the non-citizen spouse will leave the country and avoid federal estate tax.  For federal gift tax purposes, the maximum that a spouse can give to a non-citizen spouse is adjusted annually.

3.         Income Level/Maximum Tax, Estates and Trust/Single Individual Income Tax.  Generally, it is advantageous to distribute income from estates and trusts to individuals rather than pay the tax at the estate or trust tax level. Under the federal Internal Revenue Code, income is taxed on a graduated basis.  The maximum income tax rate is 35%.  The maximum income tax rate for an estate or trust is achieved at a much lower level of income than the maximum tax rate for an individual.[65]

4.         Federal Estate Tax Exemption.  There is an exemption from the federal estate tax for each taxpayer’s estate.  This is sometimes known as the unified credit.[66]

5.         Personal Exemption.  Each taxpayer is entitled to a personal exemption which is adjusted annually.  If a person pays more than 50% of support of a relative and a relative had gross income for the year less than the personal exemption amount and has not filed a joint return with his or her spouse and the person paying the support may claim the relative as a dependant on the person’s federal income tax return.[67]

6.         Federal Insurance Contributions Act (FICA) Wage Base.  Social Security and Medicare Part A taxes are imposed on all employers and employees on cash wages in excess of the threshold in any calendar year.[68]  Social Security Old Age, Survivors, and Disability Insurance (OASDI) taxes are limited to the Social Security wage base.[69]  There is no limit for the imposition of the tax for Medicare Part A.

7.         Federal Unemployment Tax Act ( FUTA) Wage Base.  If an employee receives total cash wages in excess of the FUTA Wage Base in any calendar quarter, Federal Unemployment Taxes must be withheld.[70]

8.         Deductible Contribution Traditional IRA.  Taxpayers are permitted to take a tax deduction for contributions to a traditional IRA.  The deductible amount is $5,000 for 2012.  In addition, taxpayers 50 years and over are entitled to a “catch up” contribution of $1,000 per year.[71]  In calendar year 2012, a maximum deductible contribution is indexed to inflation in increases in multiples of $500.[72]

9.         Applicable Dollar Limit Roth IRA.  Generally a Roth IRA is treated in the same manner as a Traditional IRA.  However, no deduction is allowed for contributions.  Contribution limits are the same as for Traditional IRAs.  To be eligible to contribute to a Roth IRA, the bona fide adjusted gross income cannot exceed the applicable dollar amount.[73]

            E.         Eligible Long-Term Care Insurance

1.         Exclusion from Taxable Income.  A person who is insured under a qualified long-term care insurance policy is entitled to an exclusion from taxable income a daily amount of long term care insurance benefit.  This is adjusted annually for inflation.

2.         Premium Deduction.  A portion of the premium for long-term care insurance is deductible as a medical expense.  The amount of the allowable deduction depends on the age of the policy holder and is adjusted annually.[74]

            F.         Standard and Poor’s 500 Index

The Standard and Poor’s 500 Index (S&P 500) is an index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors.  The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe.  Companies are selected by a team of analysts and economists at Standard and Poor’s.  The S&P 500 is a market-value weighted index – each stock’s weight in the index is proportionate to its market value.  The front-end yield is the average dividend yield for the entire group of stocks.[75]

            G.        Veterans Aid and Attendance/House-Bound Benefits

1.         Aid and Attendance.  A Veteran or the spouse of a deceased Veteran may qualify for Veterans Aid and Attendance benefits.  Essentially, the claimant must be so helpless as to require the aid of another person to perform the functions required by everyday living.  The need for A&A need not be permanent.  Aid and Attendance is a monthly check from the Veterans Administration to the Veteran.  It may be used to pay for a health companion, friend or relative who is caring for an elderly Veteran or the Veteran’s spouse.  It is particularly useful for eligible Veterans in assisted living facilities, because these funds can be used to offset the cost of the assisted living facility.

2.         House-Bound Benefit.  House-bound benefits are available to Veterans who are totally and permanently disabled.  The Veteran must be permanently house-bound.  If a Veteran is 65 or older, he is presumed to be disabled.  No disability rating is required, but the VA will require a physician’s affidavit regarding the claimant’s condition.  The Veteran is entitled to HB benefits, if he or she has a disability rated at 100% disabling under the VA rating schedule and the Veteran is substantially confined to home.[76]  If the Veteran has a 100% disability with an additional disability independently ratable at 60% or more, house-bound is not a factor.[77]

1. Determining the Continuation of Decedent’s Business
Special issues arise when a decedent is the owner of a business, such as a sole proprietorship, or has an interest in a partnership, a limited liability company, and/or an S corporation.

When the business owner dies, there must be a determination of whether the business should be continued, discontinued, or liquidated. In the event that the decedent was a sole proprietor or sole interest holder under a limited liability company or S corporation, it is likely that the business will be either discontinued or liquidated. If there are surviving partners or active members in a limited liability company or S corporation, the business will likely continue.

After making this initial determination, it is important to ascertain whether a buy/sell agreement exists. This agreement may also be known as a partnership agreement, shareholders’ agreement, or operating agreement (for LLCs). These agreements serve three important purposes. First, they may control valuation for federal estate tax. IRC §2703. However, such valuation might not be acceptable for New Jersey inheritance tax purposes. Second, these agreements detail the terms and conditions by which an individual’s shares will be transferred upon death. Third, operating control or administrative functions may be altered, pursuant to the terms of an agreement, as a result of death.

In the event that surviving partners, members, or shareholders are to buy out a decedent or his/her estate, buy/sell life insurance might have been obtained, and likely used, for the purchase of the business interests from the decedent’s estate by the surviving business members. In the event that such life insurance does not exist, or is not satisfactory to pay the decedent’s estate, the agreement should specify the terms and conditions by which the business is to be sold and purchased.

In the absence of a buy/sell agreement, the transfer of business shall be made pursuant to the will. In administering an estate, an executor should note whether instructions exist in the will as to the disposition of the business. If no such instructions exist, the executor generally has the authority to act on behalf of the decedent in disposing of the decedent’s business interest.

For tax purposes, a professional appraisal of the business interest should be obtained.  Despite the terms and conditions of a buy/sell agreement, the New Jersey Department of Treasury requires an independent appraisal for New Jersey inheritance tax purposes. In the event the business interests pass from one generation to the next within a family, it is often mandated that the appraisal come from an individual or entity other than the accountant who is routinely employed by the business. In making these evaluations, a qualified appraiser or forensic accountant should explore whether discounts can be obtained for lack of marketability or minority interests when appropriate.

2. Steps to Take in Dealing with Simultaneous Death
“Simultaneous death” means that two or more individuals, who were the beneficiaries of each other’s estates, die at the same time.  This term is defined as a beneficiary who fails to survive a decedent by 120 hours.  Once 120 hours elapses, the property is considered vested in the beneficiary even if he or she has not yet received the property.

When these individuals die without wills, N.J.S.A. 3B:6-3 provides that property which would have passed to intestate beneficiaries, “shall be divided in as many equal portions as there are successive beneficiaries and these portions shall be distributed respectively to those who would have taken in the event that each designated beneficiary had survived.” Further, N.J.S.A 3B:6-4 deals with property that was held either jointly with right of survivorship or as tenants by the entirety by converting such property into a tenancy in common.  Then, each individual’s interests passes through his or her own estate. If the primary beneficiary of a life insurance policy dies at the same time as the holder of the policy, N.J.S.A. 3B:6-5 provides that the proceeds pass to the contingent beneficiary.

These laws governing intestacy are superseded by any lawful provision in a will, living trust, deed, or contract of insurance. Such documents may lengthen or shorten the aforementioned period of time for survival and/or may make a presumption regarding one party predeceasing the other in the event of a simultaneous death.

3. In Kind Distributions
Personal representatives and beneficiaries often think that the job of an executor or administrator is to liquidate all of the estate assets and to distribute checks to the heirs. However, beneficiaries are entitled to “in kind” distributions as well. Pursuant to N.J.S.A. 3B:23-1, there are two forms of in kind distributions. First, a specific devisee under a will is entitled to specific bequests made to him or her. Second, if a particular asset is not devised by a will, or if the decedent dies without a will, an estate beneficiary may request an in kind distribution if three conditions are met: (1) the person has not previously demanded payment in cash, (2) the property distributed in kind is valued at fair market value as of the date of its distribution (not as of the date of death), and (3) no residuary devisee has requested that the asset in question remain part of the residue of the estate. This distribution can be made outright if it falls within the percentage of the estate that the beneficiary is entitled to. If the in kind distribution exceeds that interest, an executor or administrator may distribute it if the beneficiary is willing to pay the difference between his or her interest and the fair market value of the asset. In this event, or in the event that another residuary devisee makes the request that an asset remain part of the residue of an estate, a court order should be obtained to authorize the distribution.

4. Filing for Partition of Undivided Interests in Property

Occasionally, two or more heirs or devisees may be entitled to distribution of undivided interests in the real or personal property of an estate. This typically occurs with devises of real property.  In such a case, an action before the probate court may be initiated for partition. This action can be commenced by the personal representative or by any of the beneficiaries of the estate as well. This application should be made prior to the formal or informal closing of the estate.

Notice of a partition action must be given to all interested heirs or devisees. If a charity is a beneficiary, the Attorney General for the State of New Jersey shall be notified as well.

If possible, the court shall partition the property in the same manner as provided by law for civil actions of partition. If the court determines that a partition cannot be made without prejudice to the owners and cannot be conveniently allotted to any one particular party, the court may direct that the property be sold.

5. Petitioning the Court for Instructions
Properly drafted wills appoint executors and provide the executors with a set of instructions in order to effectively complete the administration of the estate. Unfortunately, the instructions given in wills are not always clear. Many people use software programs and the Internet to prepare wills. These types of programs are not often of high quality. Moreover, many lay people do not have a clear understanding of probate laws. Thus, the attempt to save a few dollars in estate planning costs can frequently lead to the creation of deficient estate planning documents.

An executor is responsible for proper distribution of an estate so it is important that the executor attempt to ensure that he or she is not accused of making a mistake after distributions have been made. As such, in order to remedy deficient instructions in a poorly drafted will, an executor may petition the court for directions.  New Jersey Court Rule 4:89-1 states, “If an account is to be settled, the plaintiff in the complaint may apply to the Court for directions as to the distribution of the estate…” New Jersey Court Rule 4:89-2 states,

In actions for distribution, the complaint shall state: (a) when letters, if any, were granted to a fiduciary; (b) the names and addresses of all persons interested, specifying which of them are minors or mentally incapacitated persons; and in actions for the distribution of an intestate’s estate, the manner and degree in which the next of kin severally stand related to the intestate; (c) the balance in the fiduciary’s hands for distribution, so far as the same may be known; and (d) shall have annexed to the complaint a copy of the will or other instrument, if any, pursuant to which distribution is to be made.

The issue of instructions is limited to wills and trusts. Intestate estates typically are not involved in this matter because distribution will be governed by the intestacy statutes.