The Problem of Second Marriages

On occasion, you will have clients who have been married twice, each of whom have children from an earlier marriage. The first issue is should you represent both of them. I think you can obtain a waiver and represent both of them, but that is not the question. Although the conflict can be waived, the question is should you waive the conflict.

Assuming you represent both of them, their wills will probably be different, since they each have different children. If the contingent beneficiaries are children of both marriages, I don’t think you have a problem, and once you have decided you can waive the conflict, it is necessary to prepare a contract to devise pursuant to N.J.S.A. 3B1-4. The contract should obligate you not to change your wills. However, this is illusory since you can make gifts during your lifetime and defeat the purposes of the contract to devise. Therefore, you must also have language in the contract to devise that you will not make gifts to defeat the purpose of your wills. This is not illusory, but I would refer to it as amorphous since you could spend money on your own children that would be difficult and hard to trace.

Therefore, second marriages are fraught with issues without absolute solutions and the conflicts should be seriously considered. That is, assuming there is a conflict, should you waive the conflict and how you preserve the rights of each.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© June 2012, Post 202

Timing of Transfer of a House to a Protected Transferee

In Post 6, I pointed out that the transfer of the home to certain individuals does not give rise to a penalty. One of these individuals is a child who provided care for a parent so that the parent need not go into a nursing home.

I pointed out also that the time of transfer is not defined by the statute.

The key point of this article and a point I feel necessary to repeat, is that the transfer should be made at the time of application for Medicaid. A prior transfer, could be challenged by Medicaid as not being a transfer to a protected transferee.

However, if the transfer is made pursuant to the Medicaid application, evidence can be adduced to show the services rendered by the child, and then Medicaid can approve the transfer of the house to the protected transferee without any penalty.

Of course the problem is if the child is only one of the beneficiaries under the will and receives the house, there may not be enough assets for the other children. You, as the attorney for the mother, should not be concerned about this issue for the obligation is to your client (the mother). However, I think you have a further obligation to explain to the transferee that the transfer could be challenged by the other children.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© June 2012, Post 201

In Personam Jurisdiction

Although not directly related to elder law, the question often arises as to whether the state has personal (in personam) jurisdiction over an individual. The leading case is International Shoe Co. v. State of Washington, Office of Unemployment Compensation and Placement et al. No. 107. 66 S. Ct. 154. International Shoe Co. held that there must be "sufficient contacts or ties with the state of the forum to make it reasonable and just according to our traditional conception of fair play and substantial justice to permit the state to enforce the obligations which have incurred there." The relevance of this case is that if a judgment is rendered in one state and an individual moves to another state, the judgment can be enforced under the full faith in credit clause. The only exception to this rule is if it is abhorrent to the second state to enforce the judgment of the first state. In today's environment, such a decision is unlikely.

However, if the judgment in the initial state has been appealed and is not a final judgment, the full faith in credit clause does not apply.

Suppose you are an attorney in the second jurisdiction and the judgment in the first jurisdiction is under appeal. My recommendation would be to file an interpleader action and have the proceeds turned over to the judge in your jurisdiction, and let the judge hold the proceeds until the decision in the first jurisdiction becomes final since at that time, the full faith and credit clause would apply.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© June 2012, Post 200

Election of the Trustee for a Trust

Very often an attorney will name the surviving parent as trustee of a trust for children if the other parent dies. This approach has negative tax consequences. Firstly, since the surviving parent would have an obligation to support the child, under the grantor trust rules, the income is taxable to the surviving parent as trustee and not to the child. If we have a large estate, and the surviving parent is the trustee, the corpus will be included in that person's estate.

Such a problem can be alleviated even if the surviving parent is trustee if we limit the individual's power to an ascertainable standard. "Ascertainable standard" is defined by the regulations under Section 2041 as health, support, maintenance or education. Notwithstanding, I would be reluctant to name the surviving parent as trustee, because in all likelihood the remaindermen are the children, which could lead to litigation.

Therefore, an ideal trustee would be an aunt or an uncle or the beneficiary, who had no obligation and there would no tax or estate tax consequences for the trustee.

Another solution to the trust situation would be a trust having co-trustees whose interest is adverse to the other. That is, if they were both remaindermen, the distributions need not be limited to an ascertainable standard. However, having two trustee-remaindermen, gives rise to the problem of a disagreement. That is, if the co-trustees disagree, this might require a court proceeding which would be very costly.

Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.

© June 2012, Post 199