New Jersey Gets Aggressive with Estate Recovery (Part 4)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Recovery Defense Attorney

In Part 1 of this series I introduced you to an appeal case involving a priority lien for reimbursement of Medicaid benefits. Part 2 discussed the case in greater detail, while Part 3 gave you a better understanding of the N.J. regulations. In this final post of the series I would like to tie it all together for your understanding.

In this case the decedent had received a total of $166,981.25 in Medicaid benefits until his death. The state filed a priority lien claim against the Estate pursuant to N.J.S.A. 30:4D-7.2 for reimbursement. The decedent’s estate argued that the statute did not apply because the right to an elective share was personal to the surviving spouse and could only be exercised during her lifetime.

The estate also contended that the decedents elective share was zero because the proceeds from the sale of the condominium were excluded from Mary’s augmented estate under N.J.S.A. 3B:8-5, which provides, in pertinent part, that “any transfer of property shall be excluded from the augmented estate under N.J.S.A. 3B:8-3, if made with the written consent or joinder of the surviving spouse.” They argued that this statute applied because Arthur willfully and in writing through the deed transferred his interest in the condominium to Mary.

The judge rejected the Estate’s argument that the decedent had no right to an elective share because of the fact that the parties had been living separate and apart at the time of her death. The judge determined that mere physical separation because of a spouse residing in a nursing home was not by itself enough to prevent that spouse from claiming an elective share. The judge emphasized there was nothing in the legislative history of N.J.S.A. 3B:8-1 that intended such a result.

The judge also found that despite the decedent having never exercised the elective share during his lifetime, it was available to him and his ability to exercise that right while alive was not excepted from N.J.S.A. 3B:8-1. The judge concluded that DMAHS’s broad estate recovery powers entitled it to seek reimbursement of the Medicaid benefits an individual received even where he or she did not pursue the elective share while alive.

Because this appeal involved a trial judge’s interpretation of the Medicaid and elective share statutes, the appellate court review was de novo meaning, it conducted a separate independent evaluation of the merits of the appeal. However, the trial court’s factual findings “were binding on appeal when supported by adequate, substantial, credible evidence.

In its analysis the appellate court discussed N.J.S.A. 3B:8-1 which prevents a spouse, if divorced, from claiming the right to share in the decedent’s estate, and also prevents a spouse from such entitlement if the parties no longer live together and were “embarked on a divorce action with good cause prior to the spouse’s death.” Hence, a separation without a judgment of divorce or cause of action for divorce can disqualify a spouse from being entitled to an elective share. However, there must be evidence, beyond mere separation, of a cause of action for divorce to disqualify a surviving spouse from elective share rights. Mere separation is not enough. There must be evidence that the relationship was “sufficiently removed from the normally thought of state of matrimony as to make such an election inappropriate.” The courts have described this situation “as a quasi-divorced state-a separation either by judicial decree or accompanied by circumstances which would have enabled the decedent to obtain a divorce.

In this case, although living separate and apart for approximately three years at the time of Mary’s death, the couple’s relationship was not sufficiently removed from the normally thought of state of matrimony that would preclude Arthur from claiming an elective share of Mary’s estate. There was no evidence whatsoever of marital problems or discord, or that the couple was estranged, no longer considered themselves husband and wife, had no intention of continuing their marriage, and considered their marriage “dead”.

Have an Estate Recovery case being pursued by New Jersey? If so, 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.