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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
A woman I know decided to read over her will – something she hadn't done in several years. To her shock, she found that the chief beneficiary of her estate would be her former husband. And that the will didn't have any provision for a child she had had a few years before.
But making sure that you have a will, and an up-to-date will, isn't the only important thing people should do to protect their assets.
What if you were to become disabled – hurt in a traffic accident, for instance? "The most important way to keep control if you're disabled," says lawyer Peggy Knee, "is to have given someone a ‘power of attorney.'"
This agent can do all sorts of things for you – visit your bank to withdraw cash, have your car inspected, pay bills.
But don't keep the empowering document locked up, she advised. Your agent may have to show it to a bank official, for instance.Give a power of attorney to someone you trust, Knee urged. "Whoever you choose, be cautious." And indicate when it becomes effective – right now, or only when a person is disabled (called a "springing" power of attorney).
You can choose more than one person to have your power of attorney, she went on. And you can choose a successor agent – "If not Mary, then John."
A power-of-attorney document needs special language to enable the agent to make gifts on behalf of the disabled – perhaps to enable the disabled person to qualify for Medicaid, the medical program for the less well-to-do.
Some companies may give an agent a hard time with regard to power of attorney, Knee warned. At the time, she happened to be talking to a group of older people in Paramus, and someone claimed that TimeWarner is particularly difficult to deal with – even if the agent wants to pay a TimeWarner bill for someone disabled.
What if the agent wants to (for instance) pay a bill for someone disabled, but the company owed the money balks – and is far away? Fax the power-of-attorney document to the company, she suggested.
The enabling document can authorize the agent to arrange for the disabled's living arrangements. "But the agent can't force someone to go into a nursing home," she said.
Power of attorney ends with the disabled person's death.
As for a will, Knee said that it's a good idea for people have one even if they don't own much in the way of assets. "Otherwise, your assets may wind up in hands you didn't expect." For example, if your closest living relative is someone you don't even speak to, then he or she may end up inheriting your estate if you die intestate. Talk about "laughing heir"!
Be careful in appointing an executor, she went on – the person responsible for carrying out the terms of the will. "Choose someone responsible," she advised. And choose a successor executor in case the first is no longer available.
As for estate taxes, everything is up in the air now. On Jan. 1, unless Congress takes action, Federal taxes will revert to applying to estates worth $1 million or more – although it is $3.5 million in 2010. There will also be a 45 percent tax, with a $675,000 exemption.
In New Jersey, she went on, it's easy for people to exceed the $675,000 exemption – if they own a house. But the New Jersey estate-tax rate is much lower.
To reduce your estate, Knee pointed out, you can make gifts – giving $13,000 a year to anyone you wish to, and to as many people as you like. "But once it's given," she warned, "it's given. It's gone."
Besides the $13,000 a year, she pointed out, you also have a lifetime $1 million exemption.
Turning to the subject of living wills or health-care proxies, Knee said that if you don't indicate what your wishes are, you may be (for example) attached to life-support machines you don't want. "It's important take control," she said.
I asked: Should you keep your living will on your person – in case of an accident? You might carry a card saying you have such a will, she said. "And keep it available – not in your safe-deposit box. And let people know that you have a living will."
She strongly advised older people to have long-term health-care insurance, pointing out that in Bergen County the cost of a nursing home may be an average of $10,000 a month.
As for qualifying for Medicaid in New Jersey, Knee said that you must be a U.S. citizen or resident alien, living here, and 65 or older unless blind or disabled. But to deal with people who give away their money in order to qualify for Medicaid, there's a five-year "look back" period.
The state has two Medicaid programs:
The "medically needy" program, where someone can retain $4,000 in assets but has no in-patient hospital care, and
The "Medicare only" program, where the person can retain only $2,000, but receives in-hospital care.
A principal residence may be excluded from income – depending on who's living there. The institutionalized person, of course, qualifies, as does a spouse. Also excluded: an automobile, wedding and engagement rings, term life insurance, and so forth.
A person can "spend down" his or her assets by various legal means, Knee noted, such as prepaying for a funeral and purchasing a new home (when the spouse is not institutionalized).
For help with such legal matters, Knee recommended an elder law attorney. How much might such a lawyer charge? I asked. From $500 to several thousand, she said.
Knee, who runs the Knee Law Firm in Hackensack, is certified by the National Elder Law Foundation as an elder law attorney.
She is a member of the New York, New Jersey, and Florida bars, and has been a lecturer at the Rutgers-Newark University School of Law.
The lawyer received her B.A. from Fordham College, her law degree from the Fordham University School of Law, and a degree in taxation from New York University.
A past president of the New Jersey Bar Association, she has won many awards and has written numerous papers.
Her practice includes comprehensive family planning – elder- law planning, pre- and post-Medicaid application planning, guardianships, conservatorships, estate planning for the community spouse, and so forth.
Readers with financial questions are invited to write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
