If you have attended a free dinner seminar on estate planning, you have heard the pitch. Probate is a nightmare, the government is coming for your house, and the only thing standing between your family and financial ruin is a revocable living trust — available tonight at a special seminar price.
Here is the honest answer I give my clients: a revocable living trust is a genuinely useful tool, but in New Jersey it is oversold. Whether you need one depends entirely on your situation, and most of what the seminars claim is either exaggerated or flatly wrong.
What a Revocable Living Trust Actually Is
A revocable living trust is a legal arrangement you create during your lifetime. You transfer your assets — house, bank accounts, investments — into the trust and name yourself trustee. You keep complete control: you can spend the money, sell the property, change the terms, or revoke the whole thing whenever you want. Under N.J.S.A. 3B:31-43(a), a New Jersey trust is revocable unless its terms expressly say otherwise.
When you die, your chosen successor trustee steps in and distributes everything per your instructions, with no court proceeding for the assets actually in the trust. For income tax purposes, the IRS pretends the trust does not exist while you are alive — a revocable trust is a grantor trust, so all income is taxed to you exactly as if you still held everything in your own name.
Does a Revocable Trust Save You Meaningful Probate Costs in New Jersey?
The number one selling point is probate avoidance. In some states that warning has real teeth. In New Jersey, it mostly does not. I have written in detail about what probate actually looks like here: for a typical uncontested estate, it is an administrative process through the county Surrogate's Court, with typical government filing fees and costs, and no courtroom appearance required. Attorney fees are not set by a statutory percentage the way they are in California or Florida.
So when a trust is marketed to you mainly as New Jersey probate avoidance, ask what problem is actually being solved — for many families, that probate was never going to be expensive. Avoiding probate may have some value, but it is one benefit among several, and it should not be the whole sales pitch.
Does a Revocable Trust Save You Taxes?
This is where the seminar pitch falls apart for New Jersey residents. A revocable living trust does not reduce your taxes — not federal, not state.
New Jersey repealed its estate tax for individuals who died on or after January 1, 2018. There is nothing left for a trust to avoid. The New Jersey inheritance tax, on the other hand, is very much alive — and a revocable trust does nothing to escape it. Because you keep the power to revoke, the state treats the trust property as a transfer taking effect at your death, taxable under N.J.S.A. 54:34-1(c). The tax depends on who receives the assets, not on whether they passed through probate or a trust. Transfers to a spouse, children, parents, and other Class A beneficiaries are exempt either way; transfers to more distant relatives are taxed either way. The trust changes the mechanics, not the tax bill.
Does a Revocable Trust Protect Your Assets?
Because you can revoke the trust and take everything back at any time, your creditors can reach the assets too — a court can simply order you to revoke it. If creditor protection is your goal, a revocable trust provides none.
The same logic applies to Medicaid, and this is the version I see most often. New Jersey's Medicaid rules are explicit: for a revocable trust, the entire corpus counts as a resource available to you (N.J.A.C. 10:71-4.11(e)1.i). Every dollar in the trust counts toward the $2,000 resource limit. Putting your house into a revocable living trust does absolutely nothing for Medicaid eligibility. If sheltering assets from long-term care costs is the objective, that requires an irrevocable trust under completely different rules, including the five-year lookback.
What It Actually Does Well
With the myths cleared away, here is what the trust genuinely offers. First, privacy: probate is a public process and your will becomes a public record, while a trust is administered privately by your successor trustee. Second, out-of-state property: a Florida vacation home or Pennsylvania condo held in the trust avoids a separate probate proceeding in each of those states.
Third, incapacity planning. Your successor trustee can step in and manage trust assets without court involvement — but only for assets actually in the trust. Property left outside it may still require a guardianship proceeding, and a court-appointed guardian can, with court approval, exercise your powers over the trust itself. A trust is a strong incapacity tool, but it does not replace a durable power of attorney or healthcare documents. As noted above, it also does not help an incapacitated person qualify for long-term care Medicaid.
Fourth, control over distributions. You can keep a minor child's inheritance in trust until an age you choose, and in a blended family you can provide for a surviving spouse for life while preserving the remainder for your children. One caution: if a beneficiary has a disability and receives means-tested benefits, a standard revocable trust can disqualify them — that situation calls for a special needs trust, a different instrument.
The Step Everyone Skips: Funding the Trust
The failure I see more than any other: someone pays several thousand dollars for a beautiful trust document, takes it home, puts it in a drawer, and never funds it. A trust only controls the assets you actually transfer into it — the house needs a new deed, the accounts need retitling, and each transfer takes paperwork.
An unfunded trust is an expensive stack of paper. Assets left outside it go through probate exactly as if the trust did not exist, which means the client paid for probate avoidance and got probate anyway. If you create a trust, fund it promptly and completely, and review it whenever you acquire significant new assets. Treat funding as part of the engagement, not homework for later.
When I Tell Clients Yes — and When I Tell Them No
I recommend a revocable living trust without hesitation for clients who own real estate in another state, have strong privacy concerns, want incapacity planning beyond a power of attorney, have minor children with significant assets, or are navigating a blended family.
I talk clients out of one just as often. If your estate is straightforward — a New Jersey home, bank and investment accounts, everything going to your spouse and then your children — a well-drafted will, current beneficiary designations, and payable-on-death designations accomplish essentially everything a trust would, at a fraction of the cost. A properly drafted and funded trust typically runs several thousand dollars. Spending that to solve a problem you do not have is not planning.
The Bottom Line
A revocable living trust is a tool, not a magic wand that solves all potential problems. It does not cut your taxes, does not protect assets from creditors or Medicaid, and in New Jersey it does not buy the dramatic probate savings the seminars may advertise. What it does buy — privacy, control over distributions, incapacity planning, and multi-state simplicity — is genuinely valuable for the right family. The right question was never "should I get a living trust." It is "what problem am I trying to solve." If the answers involve privacy, out-of-state property, minor children, a blended/second family, or incapacity, a trust may be exactly right. If they involve taxes, asset protection, or fear of New Jersey probate, you are being sold a solution to a problem you do not have — and the documents you actually need are a current will, a durable power of attorney, a healthcare proxy, and a living will. Before you sign anything at a seminar, talk to an attorney who asks about your family first and reaches for a product second.
When Daniel's father was diagnosed with Parkinson's disease, Daniel cut back his hours at work and moved into the family home to care for him. He cooked meals, helped his father bathe and dress, drove him to medical appointments, and sat up with him on the bad nights. Every month, his father wrote him a check for $2,000. Nobody in the family thought twice about it. The care was real, the need was obvious, and the payment simply recognized what Daniel was giving up to provide it.
Two years later, Daniel's father entered a nursing home and applied for Medicaid. The county welfare agency pulled five years of bank statements, found $48,000 in checks written to Daniel, and treated every dollar as a gift. The result was a transfer penalty — months of Medicaid ineligibility imposed at the precise moment the family could least afford to pay for care privately.
This is one of the most punishing and most avoidable mistakes in Medicaid planning. New Jersey law does not prohibit paying a family member to provide care. But it does presume — aggressively — that money paid to a relative without a written agreement in place beforehand was a gift, not compensation. Overcoming that presumption after the fact is extraordinarily difficult. This post explains the rule, the presumption, and the written caregiver agreement that solves the problem.
Informal Payments Are Presumed Gifts
The governing New Jersey regulation, N.J.A.C. 10:71-4.10, contains a provision aimed squarely at this situation. It provides that when a transfer is "intended to compensate a friend or relative for care or services provided in the past," any care "provided for free at the time [it was] delivered shall be presumed to have been intended to be delivered without compensation." In plain terms: if no agreement to pay existed when the care was provided, the regulation treats the care as having been provided for free — and treats the later payment as a transfer for no compensation. N.J.A.C. 10:71-4.10(b)(6)(ii).
That presumption can be rebutted, but only with "credible documentary evidence preexisting the delivery of the care or services indicating the type and terms of compensation." Notice what that requires. The documentation must exist before the care begins, and it must spell out what the caregiver will do and what the caregiver will be paid. A handshake understanding, a family consensus, or a written agreement drafted a year into the arrangement does not satisfy this standard.
The regulation adds a second constraint that surprises many families: the compensation "shall not be greater than the prevailing rates for similar care or services in the community," and any amount above the prevailing rate "shall be considered to be uncompensated value." Simply agreeing to paying a daughter $500.00 an hour for companionship and light housekeeping does not make the payment legitimate — the amount above fair market value is treated as a gift regardless of what the family agreed to.
The Legal Framework Behind the Presumption
The federal statute, 42 U.S.C. § 1396p(c)(1)(A), requires state Medicaid plans to impose a period of ineligibility when an institutionalized individual "disposes of assets for less than fair market value" during the 60-month lookback period. New Jersey implements that mandate through N.J.A.C. 10:71-4.10, which adds a procedural feature families need to understand: every transfer within the lookback period is presumed to have been made to obtain earlier Medicaid eligibility than the applicant would otherwise be entitled to. N.J.A.C. 10:71-4.10(i).
The applicant can rebut that presumption, but the standard is demanding — "convincing evidence that the assets were transferred exclusively (that is, solely) for some other purpose." N.J.A.C. 10:71-4.10(j). "Exclusively" is doing heavy work in that sentence. If the county believes even part of the motivation was accelerating Medicaid eligibility, the rebuttal fails.
📊 Example Calculation: Take the $48,000 in undocumented caregiver payments from the opening scenario. Penalty Period = $48,000 ÷ $420.67 (New Jersey's daily penalty divisor, effective April 1, 2026) = approximately 114 days of Medicaid ineligibility. During those 114 days, the applicant must pay for long-term care entirely out of pocket — after already spending down to the $2,000 asset limit.
What a New Jersey Court Did With Documented and Undocumented Caregiver Payments
The distinction between documented compensation and undocumented transfers is not theoretical. In E.C. v. Division of Medical Assistance and Health Services, No. A-0832-17T4 (N.J. Super. Ct. App. Div. Mar. 25, 2019) (unpublished), a 103-year-old Medicaid applicant had paid a caretaker $150 per week in cash — $3,600 total — for housekeeping, meal preparation, bathing, and toileting assistance provided from December 2014 through May 2015. The administrative law judge found the caretaker's testimony about those services credible, and that $3,600 was excluded from the transfer penalty.
Everything else was penalized. Additional amounts the caretaker claimed to have spent on the applicant's behalf — groceries, household items, podiatrist visits — were treated as uncompensated transfers because no receipts were produced at the hearing. An affidavit submitted after the hearing, unsupported by bank records, was rejected as not credible. And $12,510 claimed for caretaking services provided after the applicant entered the nursing home was disallowed. The agency's director adopted the decision, and the Appellate Division affirmed.
The lesson of E.C. is blunt: New Jersey's system rewards documentation and punishes its absence. Credible, specific evidence of services actually performed at a reasonable rate survived. Approximations, after-the-fact affidavits, and payments for care the nursing facility was already providing did not.
A Written Caregiver Agreement
A caregiver agreement — sometimes called a personal care agreement or personal services contract — is a written contract between the person receiving care and the person (who may be a family member) providing it. When properly structured, it converts what the regulation would otherwise presume to be a gift into documented compensation for services at fair market value. The regulation itself tells you what the agreement must contain to survive scrutiny:
It must be in writing and signed before care begins. This is the single most important requirement. The regulation demands documentary evidence "preexisting the delivery of the care or services indicating the type and terms of compensation." An agreement drafted after months of caregiving cannot retroactively recharacterize free care as compensated care.
It must describe the specific services, schedule, and rate. The agreement should state what the caregiver will do (bathing, dressing, meal preparation, medication supervision, transportation, overnight supervision), how many hours per week, and the hourly rate. Vague descriptions invite the county to question whether the services were actually worth the payment.
The rate must not exceed prevailing community rates. The rate of pay cannot exceed fair market value. Whatever the rate agreed upon, it must be supportable — the portion above the prevailing rate is uncompensated value, dollar for dollar.
Payment should track the services as they are performed. Paying the caregiver on a regular schedule — weekly or biweekly, by check or traceable transfer — looks like compensation. A single lump-sum prepayment for years of future care looks like a transfer, and it invites the county to treat it as one.
The services must be real, needed, and documented. A care log recording the dates, hours, and tasks performed each week is the documentary backbone of the arrangement. It is also worth obtaining a physician's written statement that the person needs assistance with daily activities — while the regulation does not expressly require it, it substantially strengthens the "credible documentary evidence" the regulation calls for.
The caregiver should report the income. Payments under a caregiver agreement are generally taxable income to the caregiver. Reporting the income is both a tax obligation and further evidence that the arrangement was genuine compensation rather than a disguised gift. Consult a tax professional for the specifics.
Common Mistakes That Sink Caregiver Agreements
Even families who understand the concept routinely make errors that render their agreements worthless:
Backdating the agreement. An agreement signed today but dated six months ago — or drafted after the Medicaid application is already contemplated — fails the regulation's requirement that the documentation preexist the care. A backdated agreement is not a plan; it is evidence of the problem.
Lump-sum prepayment. Paying $60,000 up front for "three years of future care" asks the county to accept on faith that the services will be performed. Pay as the care is delivered.
Vague duties. "Assist as needed" does not establish what was done or how the payment was calculated. Define the tasks and schedule.
No care logs. A contract proves an agreement existed; it does not prove the caregiver actually performed 30 hours of work in a particular week. Keep contemporaneous records.
Above-market rates. The excess over the prevailing rate is uncompensated value by regulation, no matter what the family agreed to.
Cash with no paper trail. The E.C. case is the cautionary tale: the documented $3,600 survived; the undocumented amounts did not.
Paying for care the facility provides. Once the person is in a nursing home, paying a relative for the same personal care the facility is already delivering will not be treated as fair-market compensation, as E.C. demonstrates.
Final Thoughts
A caregiver agreement is one of the simplest documents in elder law and one of the most consequential. It costs little to prepare and it protects two things at once: it fairly compensates the family member who sacrifices time and income to provide care, and it prevents that compensation from being recharacterized as a gift that triggers months of Medicaid ineligibility. But the protection only exists if the agreement is in place before the first hour of care is delivered. Once the payments have been made without one, the regulation's presumption does the rest.
Many New Jersey families are surprised to learn that qualifying for Medicaid Long-Term Services and Supports (MLTSS) depends not only on income but also on how retirement assets are classified. A pension, IRA, 401(k), 403(b), annuity, or other retirement account can dramatically affect Medicaid eligibility, though not always in the way people expect. Understanding how these assets are treated is critical if you are planning for nursing home care, assisted living, or home-based long-term care through New Jersey's MLTSS program.
Understanding MLTSS Financial Eligibility
MLTSS is New Jersey's Medicaid program that helps pay for long-term care services in nursing homes, assisted living facilities, and at home. To qualify, an applicant must first meet the program's clinical (level-of-care) requirements and then satisfy both an income test and a resource (asset) test. For 2026, a single applicant generally may have no more than $2,982 per month in gross income and no more than $2,000 in countable resources. The income test and the resource test are separate issues and should not be confused with one another.
What Happens If Your Income Is Over the Medicaid Limit?
Medicaid requires applicants to disclose virtually all sources of income, including Social Security retirement benefits, pensions, IRA distributions, annuity payments, employment income, veterans' benefits, and other recurring payments.
Many people assume that earning more than the monthly income limit automatically disqualifies them from Medicaid. In New Jersey, that is not necessarily true. For individuals whose gross monthly income exceeds the limit, eligibility may still be achieved through a Qualified Income Trust (QIT), often called a Miller Trust. A QIT allows excess income to be deposited into a specially drafted trust account each month. As long as the trust is properly established and administered, the income deposited into it is generally not counted against the applicant for eligibility purposes.
This is particularly important for retirees who receive income from multiple sources, such as Social Security, pensions, and Required Minimum Distributions (RMDs) from retirement accounts. In many cases, individuals who appear financially ineligible at first glance can still qualify for MLTSS through proper use of a QIT. Read more about QITs here.
However, qualifying for Medicaid does not mean you keep all of your income. Once approved, most of the recipient's monthly income must generally be contributed toward the cost of care, subject to certain allowances and deductions. This amount is commonly referred to as the beneficiary's cost share or patient pay amount.
Because income calculations can be complex, especially when retirement accounts, spousal income, annuities, or trust distributions are involved, families should have their eligibility reviewed before assuming that excess income prevents them from qualifying.
Understanding the Resource Test
Countable resources generally include the principal balances of:
Checking and savings accounts
Certificates of deposit
Stocks and bonds
Investment accounts
Cash surrender value of certain life insurance policies
Real estate other than the principal residence
Retirement accounts
A second automobile
Some assets are exempt, including:
A primary residence in qualifying circumstances
One vehicle
Personal belongings
Irrevocable prepaid funeral arrangements
Certain burial funds
Are IRAs and 401(k)s in Payout Status Countable for NJ Medicaid?
The short answer is yes. Unlike some other states with more generous rules, New Jersey treats an IRA, 401(k), 403(b), or similar retirement account as a countable resource for Medicaid purposes, even if the account is in payout status. The account will usually have to be liquidated and spent down before eligibility can be established. This comes as a shock to many retirees, who assume these accounts are protected because they receive favorable tax treatment and shelter from certain creditors. That protection does not extend to Medicaid eligibility. Medicaid is a needs-based program, and the State expects applicants to use their own resources to pay for long-term care before the program steps in.
This is a separate issue from the income rules discussed above. Distributions from the account are generally treated as income, while the principal balance is treated as an available resource. As a result, even a single retirement account can affect both the resource limit and the income limit.
How Pensions Are Treated
Defined-benefit pensions are generally treated differently from retirement accounts holding an accumulated balance. A monthly pension payment is typically considered income rather than a resource. For example, if a retired teacher receives a $1,500 monthly pension, Medicaid generally views those payments as income. The pension itself is not an asset that can be liquidated and spent down in the way an IRA or 401(k) can. The same principle applies to Social Security retirement benefits and many government pensions.
Married Couples Receive More Protection
A single Medicaid applicant may have no more than $2,000 in countable resources. The rules are more complicated for married couples. When only one spouse requires long-term care, Medicaid is designed to prevent the healthy spouse, often called the "community spouse," from becoming impoverished. The community spouse is entitled to keep a portion of the couple's countable assets under the Community Spouse Resource Allowance (CSRA).
In 2026, the community spouse may retain up to $162,660 in countable resources, while the spouse applying for Medicaid remains limited to $2,000. Importantly, the CSRA is not based simply on whose name appears on an account. Medicaid looks at the couple's combined countable assets as of a "snapshot date" and then determines how much the community spouse may retain. In general, that amount is one-half of the combined total, subject to a minimum and a maximum that are adjusted annually. We will cover the calculation in more detail in a future post.
In addition to resource protections, the community spouse may be entitled to a portion of the institutionalized spouse's income if needed to meet living expenses. This protection, known as the Minimum Monthly Maintenance Needs Allowance (MMMNA), can be critical when the healthy spouse has limited income of his or her own.
What About Required Minimum Distributions?
Many retirees receive RMDs from their retirement accounts. The fact that an account is paying RMDs does not exempt it from Medicaid in New Jersey. Each distribution is generally counted as income when received, and the remaining account balance is counted as a resource.
Liquidating a retirement account to meet the resource limit can trigger significant income tax consequences. Anyone in this situation should consult an accountant in addition to an attorney before taking action.
The Five-Year Look-Back Period
One of the most common mistakes families make is giving away assets shortly before applying for Medicaid. New Jersey applies a five-year look-back period, during which Medicaid reviews transfers made for less than fair market value.
If Medicaid discovers gifts, transfers to children, or other below-market transfers during the look-back period, it may impose a penalty period. During that time, the applicant may be financially eligible but still unable to receive Medicaid benefits. The look-back applies not only to bank accounts but also to retirement assets and other property interests. Before transferring a retirement account, cashing out a 401(k), gifting IRA assets, or moving funds to family members, it is important to understand the potential consequences. Read more about the 5-Year Lookback here.
Asset Preservation Strategies
The good news is that Medicaid planning is not limited to giving assets away. Many lawful strategies can preserve assets while helping families prepare for future care needs. Depending on the circumstances, planning may include:
Creating irrevocable trusts well in advance of anticipated care needs
The most effective strategy is often early planning. When a family begins planning more than five years before long-term care is needed, significantly more options are usually available. Waiting until a health crisis arises often limits those options and increases financial risk.
The Bottom Line
Retirement accounts do not receive an exemption under New Jersey Medicaid rules. The account balance counts as a resource, and distributions from the account count as income.
An IRA, 401(k), 403(b), pension, annuity, or other retirement assets may affect eligibility differently depending on whether the applicant is single or married and whether distributions are being received. Because retirement assets can affect both the income and resource tests, careful planning is essential. The best time to address Medicaid planning is before a crisis occurs. Families who plan early often have significantly more opportunities to preserve assets, protect spouses, and qualify for the long-term care benefits they may eventually need.
Many people buy a timeshare thinking it will provide years of family vacations while accumulating an asset. What often gets overlooked is what happens to that timeshare after the owner's death. Unlike many assets, a timeshare can continue generating annual maintenance fees, special assessments, taxes, and other obligations long after the owner is gone.
If you own a timeshare, or if a loved one recently passed away owning one, understanding how New Jersey estate law treats these interests can help avoid unpleasant surprises.
Is a Timeshare Part of Your Estate?
A timeshare is generally considered property owned by the deceased person. If the timeshare is titled solely in the owner's name and does not pass automatically to a joint owner or trust, it will typically become part of the probate estate and be administered by the executor. Whether the timeshare is a deeded real estate interest or a contractual right-to-use arrangement, it is generally treated as an asset of the estate. For a deeded interest, ancillary probate in the state where the resort is located may be required. This can increase the cost and complexity of estate administration. For a right-to-use contract, no real property is transferred and ancillary probate is generally not required, but the contractual obligations may still bind the estate.
Are Your Heirs Required to Take the Timeshare?
One of the most common myths about timeshares is that children automatically become personally responsible for them after a parent's death.
Under New Jersey law, beneficiaries generally have the right to disclaim an inheritance. A valid disclaimer allows a beneficiary to refuse property passing to them through a will, trust, or intestacy. If an heir properly disclaims the timeshare, the law treats that person as though they predeceased the decedent for purposes of that inheritance. The property then passes to the next eligible beneficiary. It is important to note that the next beneficiary in line must also file a disclaimer if they too do not want the timeshare.
However, heirs should be careful. Taking ownership, using the timeshare, or otherwise accepting benefits before seeking a disclaimer may limit their ability to refuse the interest later. In addition, a disclaimer must be made within nine months of the transfer (generally, the date of death) or within nine months after the disclaimant turns 21.
Is the Estate Responsible for Ongoing Timeshare Fees?
Although heirs may decline the inheritance, the estate still owns the timeshare during the estate administration process. As a result, maintenance fees, assessments, taxes, mortgage payments, and other contractual obligations may continue to accrue.
Like other creditor claims, these obligations may need to be addressed before distributions are made to beneficiaries. In many cases, an executor will evaluate whether the timeshare has any market value. Unfortunately, many timeshares have little or no resale value while continuing to generate annual expenses.
If the estate has sufficient assets, creditors may seek payment through the estate administration process. New Jersey law generally provides that debts are paid from estate assets before distributions to heirs. If the estate is insolvent or the timeshare is the only asset, creditors may simply be unable to collect. Keep this in mind because timeshare companies sometimes pursue aggressive collection tactics against estates and even against heirs personally.
What Should an Executor Do With a Timeshare?
Each situation is different, but a good first step is obtaining the timeshare documents. The executor should determine:
Whether the interest is deeded real estate or a contractual membership.
Whether a loan or mortgage remains outstanding.
The amount of annual maintenance fees and assessments.
Whether the timeshare company offers a surrender or deed-back program.
Whether the interest has any realistic resale value.
In some cases, surrendering the timeshare to the resort may be the most economical solution. In others, a sale or transfer may be possible. Ignoring the issue rarely makes it disappear.
How Should a Timeshare Be Addressed in an Estate Plan?
If you own a timeshare consider selling or surrendering it before you pass away. Otherwise, your estate plan should specifically account for it. Far too often, people leave timeshares to heirs who have no interest in owning them. This can create unnecessary administrative costs, family conflict, and ongoing financial obligations.
A comprehensive estate plan should identify all real estate interests, including vacation properties and timeshares, and consider whether ownership should be transferred during life, placed into a trust, sold, surrendered, or specifically addressed in a will.
Just as important, your family should know the timeshare exists. Many executors discover a timeshare only after maintenance fee invoices begin arriving months after death. If you have not reviewed your estate plan recently, this is a good reminder to make sure assets such as timeshares, vacation properties, and other real estate are properly accounted for.
A timeshare does not disappear when its owner dies.
In most cases, it becomes part of the estate, may need to pass through probate, and can continue generating expenses until it is transferred, sold, surrendered, or otherwise resolved. While heirs generally cannot be forced to accept an unwanted timeshare, the estate may still have to address the financial obligations associated with it.
Because timeshares often create unique challenges during estate administration, they should be specifically addressed as part of every New Jersey estate plan.
When a nursing home resident applies for Medicaid in New Jersey, someone often needs to help with the application and appeal process. But who can act for the applicant, and when is a Designated Authorized Representative (DAR) form required?
Those questions were at the center of E.B. v. Division of Medical Assistance and Health Services, 431 N.J. Super. 183 (App. Div. 2013), a case that remains highly relevant for Medicaid applicants, nursing facilities, and elder law attorneys today.
The Facts of the Case
The case involved two nursing home residents who had been approved for Medicaid but wished to challenge adverse determinations through fair hearings. Their nursing facilities, acting on their behalf, requested appeals regarding Medicaid penalty periods and other issues.
The nursing homes’ attorney submitted hearing requests. However, the attorney expressly stated that he represented the nursing facilities, not the Medicaid applicants themselves. The Division of Medical Assistance and Health Services (DMAHS) responded by requiring completion of its Medicaid Designation of Authorized Representative (MDAR) form before proceeding with the appeals. The facilities refused and instead submitted their own authorization forms. DMAHS rejected those forms and would not schedule the hearings. The nursing facilities argued that DMAHS could not require use of the MDAR form. The Appellate Division disagreed.
The Court's Holding
The court upheld DMAHS's authority to require a standardized authorized representative form. It found that the MDAR requirement was consistent with federal and state Medicaid law and helped protect applicants by ensuring that the person acting on their behalf was properly authorized. The court specifically held that DMAHS's requirement that Medicaid applicants use the MDAR form did not violate federal law, did not interfere with fair hearing rights, and was a reasonable measure to protect applicants and the integrity of the Medicaid program.
Why the DAR Form Matters
From a practical standpoint, this case highlights a lesson I regularly encounter in Medicaid cases: if someone other than the applicant is acting on the applicant's behalf, a completed DAR form can prevent unnecessary delays. Counties and DMAHS often refuse to discuss eligibility issues, process appeal requests, or release information unless they have proper authorization in their files. When a DAR form is missing, the result can be avoidable delays in an already time-sensitive Medicaid application. This is particularly important in long-term care Medicaid cases, where delays can affect nursing home reimbursement and create significant stress for families.
One of the most significant parts of the decision is something many county welfare agencies improperly overlook or ignore. The attorney in E.B. did not represent the Medicaid applicants. He represented the nursing facilities. That distinction drove the outcome. The court noted that the problem arose because the attorney sought a hearing "on behalf of the respective Facility." The court explained:
Had counsel requested the fair hearings in their capacity as the plaintiffs' legal representative, we suspect that this matter would not have caused the CWA any concern.
The court also discussed DMAHS's proposed rule (which is still not formally adopted), which expressly provided:
Use of the Division's Designation of Authorized Representative Form is not required if the authorized representative is the beneficiary's legal guardian, a relative by blood or marriage, the attorney of the beneficiary hired by the beneficiary to represent the beneficiary, or a person with power of attorney for the beneficiary.
In other words, when an attorney actually represents the Medicaid applicant, a DAR form generally should not be required.
The Real-World Problem: Counties Sometimes Get This Wrong
Despite the language discussed in E.B., I still see situations where county agencies request a DAR form from an attorney who already represents the Medicaid applicant. That request is often unnecessary. An attorney retained by the applicant stands in a different position than a nursing facility, its employees, or another third party attempting to act for the applicant. The entire point of the attorney exception is that counsel already has authority through the attorney-client relationship. Unfortunately, the rules are applied inconsistently. As a result, attorneys sometimes need to explain the distinction and push back.
The Takeaway
The lesson from E.B. v. DMAHS is straightforward: make sure the proper authorization documents are in place before problems arise. If a nursing facility, family member, friend, or other third party will be communicating with the county welfare agency or DMAHS, a completed DAR form can prevent delays and disputes.
At the same time, applicants should understand that attorneys who directly represent the Medicaid applicant are treated differently. The key distinction in E.B. was that the lawyer represented the facility, not the Medicaid applicant. Getting this right can mean the difference between a smooth Medicaid process and months of unnecessary delay.
