Revisiting Estate Recovery in New Jersey (Part 2)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

In Part 1 of this series we began our discussion on Estate Recovery. I introduced you generally to the federal statutes regarding the recovery of Medicaid benefit payments. Now we will take a further look at the New Jersey statutes and their provisions which address estate recovery.

New Jersey statutes generally parallel their federal provisions. State law authorizes recovery from a Medicaid recipient’s “estate,” and provides that

“Medical assistance pursuant to or on behalf of an individual (in certain circumstances not relevant here) may be recovered from the estate of the individual or from any recipient of the property or other assets held by the individual at the time of death including the estate of the surviving spouse.”

Estate recovery may not occur from a spouse until the spouse has died. New Jersey has directed that it will use the expanded, permissive definition of “estate” authorized by 42 USC § 1396p(b)(4)(B).

(6) As used in the federal law, this section provides:

(a) ‘Estate’ includes all real and personal property and other assets in which the deceased individual had any legal title or interest at the time of death including assets conveyed to a survivor, heir or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust or other similar arrangement.

State law however limits estate recovery to the value of the Medicaid recipient’s interest in those assets. So if the applicant owns a fractional interest in an asset the law does not permit estate recovery of the full value of the asset.

Federal statutes do not allow the state to recover transfers that the Medicaid recipient made prior to his or her death, except under some circumstances. As noted, the federal statutes defining “estate” provide that the term includes assets as to which the Medicaid recipient had an interest at the time of death.

Elective Share Under New Jersey Probate Law

The elective share statutes in New Jersey come into play with Estate Recovery issues. The elective share is a surviving spouse’s right to claim a share of what is called the “augmented estate”. The augmented estate itself is all of the decedent’s probate and non-probate assets (as defined), plus essentially all of the surviving spouse’s assets (called the “surviving spouse’s estate”). If the surviving spouse takes the elective share, the elective share is first decreased by the amount of the surviving spouse’s estate. Only if that calculation still leaves some portion of the elective share unpaid will the surviving spouse be paid from the decedent’s estate.

Thus, to simplify: On the death of a person, that person’s spouse can seek an elective share. If the spouse takes an elective share, the value of all the decedent’s assets and the spouse’s assets are added together. The spouse will get a fraction of that sum. But that amount is not awarded directly from the decedent’s estate. Instead, the spouse’s elective share is first “paid out” with the spouse’s own assets. Only if that does not fully satisfy the elective share will the spouse receive money from the decedent’s estate.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.