It is an issue that most of us will be confronted with at some point in the future; how best to care for an aging loved one. People commonly think a Power of Attorney is the only method by which to manage another person’s affairs who may no longer be competent to do so. There are other forms of protective arrangements, however, under New Jersey Law which provides a person who is to serve in a  fiduciary role with substantial latitude to provide care for their loved one. These arrangements differ in nature as to the scope of the supervisory role.

The two most common forms of protective arrangements under New Jersey Law are Guardianships and Conservatorships.

Guardianships are Court supervised arrangements that provide surrogate decision making for minors or persons who are incapacitated – that is, unable to manage their property and affairs effectively.  The arrangement is typically commenced by a third-party application to the Court, and once the Court adjudicates a person to be incapacitated, it obtains jurisdiction over an incapacitated person.  N.J.S. 3B:12-1 seq.; New Jersey Court rule 4:86-1 through 10.

A Plenary or General Guardianship grants to the appointed Guardian full substituted decision making authority over all aspects of an incapacitated person’s life, including matters such as medical decisions, handling legal affairs, managing property and finances, making vocational choices, determining residence and social associations, voting, maintaining a driver’s license, seeking employment, and entering into marriage.  Because the authority of a General Guardian is sweeping, there is a preference in New Jersey to employ limited Guardianship where possible, so that an incapacitated person can retain legal authority to make decisions over as many subject areas as possible, and safe to do so.  Even a General Guardian is expected to consider and take into account expressed preferences of the incapacitated person.  Guardianships are frequently used with respect to persons who are developmentally disabled (once they attain the age of eighteen), those who are cognitively impaired, and for elderly persons with diminishing capacity.  Guardianships are also put in place where minors (under the age of eighteen) have monies or property to be managed, but, given their age, lack the legal authority to do so. 

An alternate protective arrangement is the conservatorship, which is a voluntary arrangement employed by a competent person (the Conservatee) to grant authority to a third-party (the Conservator) to manage his or her property.  New Jersey Court Rule 4:86-11.  Conservatorships are voluntary proceedings where the Conservatee is legally competent, and the legal arrangement cannot be imposed by a Court over the objections of the Conservatee.  If a Conservator is appointed through a Court proceeding, the Court oversees this arrangement and the Conservatee can at any time – providing that he or she is competent, revoke the Conservatorship.  This type of arrangement, while as not as commonly employed as Guardianships, is often appropriate where the Conversatee has limited ability to manage his or her own financial affairs, or acknowledges a difficulty in doing so effectively.  Individuals with cognitive impairments that interfere with their ability to properly handle financial matters, older persons unable to resist undue influence of family or third-parties over their financial affairs, and person suffering from mental illness, or other afflictions that place their financial stability at risk are appropriate candidates for Conservatorship.
 

Both Guardianships and Conservatorships can only be put in place by a Court, and continuing Court supervision follows the initial appointment.  This can provide significant protection to a person who is vulnerable, lacks capacity, or suffers from cognitive limitations.  Many people choose to avoid involving Courts in their personal affairs by executing in advance of any potential infirmity, Durable Powers of Attorney and Medical Advance Directives.

The decision to enter into protective arrangements should be carefully considered, as the arrangement might later be scrutinized by other individuals who feel that the arrangement is not in the best of the interests of the individual who is receiving assistance.  As such, it is often suggested that you consult with an attorney to ensure that the process is fair, and moreover, ensure that the individual receives the best possible assistance.

If you have questions regarding guardianships or conservatorships and would like to discuss your specific case in more detail, please contact me to set up an appointment here in my firm’s Lawrenceville, New Jersey office.

On January 4, 2005, the appellate court ruled that a state regulation capping the amount of funds that a Medicaid applicant may use to purchase a commercial annuity contravenes federal law. Estate of F.K. V. Division of Medical Assistance and Health Services (App. Div. No. A-1004-02T5).

Then on January 21, 2005, in the matter of A.B. v. Division of Medical Assistance and Health Services (App. Div. No. A-4973-02T2), the appellate court held that federal law prohibits the State of New Jersey from requiring that it be named as the remainder beneficiary of an actuarially sound commercial annuity purchased by the community spouse of a Medicaid applicant.

In both cases, Medicaid applicants successfully challenged state regulations which went far beyond what federal law provided and which were used to deny Medicaid eligibility for the applicant. The courts found that the State exceeded its authority and that the regulations were improperly drawn or enforced.

Supporting the State of New Jersey's aggressive efforts to pursue the recovery of Medicaid benefits paid for a nursing home resident following the resident's death, the New Jersey Appellate Division concluded in a November 10, 2004 opinion, Estate of Michael DeMartino v. State of New Jersey, Division of Medical Assistance and Health Services, that the State could assert a lien against a testamentary trust created by Anne DeMartino upon her death for the benefit of her husband, Michael. Although Michael died less than one year later, Anne had given to the trustee authority to distribute the trust funds in limited circumstances for her husband's benefit. The balance remaining in trust after the husband's death was to be distributed to Anne's children. After Michael's death, the State sought to recover from the testamentary trust benefits which were paid by the State for the benefit of Michael - despite the fact that Anne had specifically disallowed the funds to be used in such a manner.

Federal law supports and encourages the states to recover Medicaid benefits paid following a recipient's death from property of the recipient at death, as well as property in which the recipient had a legal interest, specifically described as 'other arrangements' including joint accounts and living trusts. New Jersey has adopted the most aggressive definition of a decedent's estate for recovery purposes, and has expanded the reach of federal law by adopting regulations which permit recovery from third party trusts which contain property in which the recipient had an interest in the previous five years.

Despite the fact that New Jersey laws can be no more restrictive than federal law, the Appellate Court in this case stretched to find that the testamentary trust created by Anne fell into the category of 'other arrangements' which entitled the State to make recovery from it. The judges deemed the testamentary trust to be an arrangement intended to pass assets to Anne's children and avoid estate recovery, focusing on Anne's perceived intent and not on specific laws and regulations.

Three months ago, the New Jersey Supreme Court overturned a similarly reasoned decision of the Appellate Division relating to Medicaid planning, In Re Keri, recognizing that individuals can work within the framework of existing laws and regulations to undertake Medicaid and estate planning. It is expected that the DeMartino decision will be appealed.

The New Jersey Supreme Court decided that it is lawful to institute a Medicaid spend-down on behalf of an incompetent individual when certain criteria are met. Medicaid spend-down plans are permissible when the plan does not interrupt or diminish the care that an incompetent person receives, when that plan involves the transfer of that person's natural objects, when the plan is not contrary to any expressed prior interest or intent, and the plan is clear in providing for the best interest of the incompetent person and satisfies the law's goal of allowing decisions to be made on an incompetent person's behalf that the person would make if he or she were able to act.