In New Jersey, and many other states, a surviving spouse has a right to one-third of a deceased spouse’s estate, despite provisions in the Last Will to the contrary. In other words, you may disinherit your spouse in your Last Will, but he or she can assert the statutory elective share and still obtain one-third of your estate. Legislatures passed these laws to avoid spouses becoming wards of the State.
A technique, often used in Medicaid planning, is for a healthy spouse to disinherit a spouse who is in a nursing home, or one who is likely to go into a nursing home, so that the money can be left to the next generation, rather than be paid to a nursing home for care. Certainly, if a spouse is institutionalized and is receiving Medicaid, an inheritance will cause that spouse to lose Medicaid benefits, and the inheritance will be used to pay for nursing home care. Disinheriting the institutionalized spouse would seem to be the answer. However, the Spousal Elective Share can be asserted to obtain money from your estate, despite the disinheritance clause in your Last Will.
New Jersey Insists that the Inheritance Be Used First
It can be agreed that the nursing home spouse is not likely to assert the Elective Share. In the vast majority of cases, this spouse is probably in agreement that the money should go to the children.
However, the State of New Jersey will stand in the shoes of this spouse and assert the Elective Share on his or her behalf. Medicaid will insist that the Spousal Election be made and the money used for the spouse’s nursing home care. Once the inheritance money is used up, Medicaid will begin payments again.
Spouse Cannot Waive an Inheritance
Last week, South Dakota’s highest court ruled that even if the nursing home spouse signed a waiver of her Spousal Elective Share, in addition to being disinherited by her husband, the Elective Share must still be paid. The Court disliked that the disclaimer was only executed “in an attempt to obtain Medicaid benefits while simultaneously transferring the value of the elective share to the…son and grandchildren”, in re: Estate of Shipman (S.D., No 2013 S.D. 42, June 5, 2013). Although this case is not controlling in New Jersey, I would look for a similar result here. The states need to find revenue.
© Shanahan & Voigt, LLC 2014
BE ADVISED that these comments are not legal opinions and are not to be relied upon as legal advice. If you need legal advice, contact your county bar association; most of which have referral services.