You Cannot Arbitrate a Will Dispute in New Jersey

You Cannot Arbitrate a Will Dispute in New Jersey

by | May 12, 2026 | Estate Administration, Estate Planning, Last Will and Testament, Probate, Trusts

Can a testator include an arbitration clause in their Will that forces beneficiaries to resolve disputes in a private arbitration forum rather than a New Jersey court? For the first time, the New Jersey Appellate Division has answered that question directly — and the answer is no.

In a case published on April 21, 2026, In re Estate of Samuel P. Hekemian, the Appellate Division held that an arbitration provision contained in a Last Will and Testament is unenforceable under New Jersey law.

Background: The Hekemian Family Estate

Samuel P. Hekemian died testate in August 2018, survived by his wife Sandra and their four adult sons: Peter, Jeffrey, Mark, and Richard. His 2002 Last Will and Testament (2002 LWT) appointed his son Peter and longtime advisor Edward G. Imperatore, Esq. as co-executors and co-trustees of three testamentary trusts established under the Will.

The 2002 LWT contained an arbitration clause providing that any dispute regarding the interpretation of the Will or its administration “shall be submitted for settlement by arbitration.” The clause declared arbitration to be “the exclusive remedy” for resolving such disputes and stated that the arbitrator’s decision “shall be final and binding upon all interested parties and shall not be appealable to any court of law.”

The same arbitration provision appeared in reciprocal Wills executed simultaneously in 2001 by Samuel and Sandra that were prepared by the same New York attorney. When Sandra and Richard later filed exceptions to the co-executors’ first intermediate accounting of the estate, the co-executors moved to compel arbitration.

A Second Look at the Same Arbitration Clause

This was not the first time the arbitration provision had been challenged. In an earlier unpublished opinion, the Appellate Division had affirmed the denial of a motion to compel arbitration of Richard’s request for an accounting, finding that the clause was not the product of mutual assent under traditional contract principles and that it failed to explain that Richard was relinquishing his right to bring a claim in court. At that time, however, the court stopped short of declaring the arbitration provision categorically unenforceable.

In the intervening period, Sandra joined the litigation and filed her own exceptions to the co-executors’ accounting. Unlike Richard, Sandra had received distributions under the 2002 LWT. The co-executors argued this distinguished her situation and that her participation in the Will’s benefits, combined with the execution of the reciprocal 2001 Wills, established the mutual assent necessary to compel her to arbitrate. The trial court rejected that argument and denied the motion. The co-executors appealed.

The Court’s Holding: Two Independent Grounds

The Appellate Division affirmed the trial court’s denial, but went further than the lower court by issuing a definitive ruling on a question of first impression: arbitration clauses in testamentary instruments are unenforceable under New Jersey law. The court rested its holding on two independent and mutually reinforcing grounds.

1. Lack of Mutual Assent

An agreement to arbitrate, like any contract, requires mutual assent — a knowing and voluntary waiver of the right to pursue claims in court. The court reaffirmed its earlier conclusion that the arbitration clause failed to explain, in clear and unambiguous terms, that interested parties were relinquishing their right to sue. Citing Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430 (2014), the court emphasized that “the point is to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue.”

The co-executors argued that Sandra’s simultaneous execution of a reciprocal Will containing the same arbitration clause demonstrated her assent. The court rejected this. While a meeting of the minds is not required for a Will to be effective — because a Will is a unilateral disposition of property, not a contract — that principle cuts in the opposite direction for arbitration purposes. Precisely because a Will is unilateral, neither Sandra nor any other interested party was afforded the opportunity to consider or elect to waive their right to proceed in court. The court was not satisfied that the simultaneous execution of reciprocal Wills, without more, established the kind of informed, knowing assent required for a valid arbitration agreement.

2. Inconsistency with the Probate Code

Even if the assent problem could be overcome, the court held that arbitration clauses in Wills are incompatible with New Jersey’s statutory framework for estate administration. The Probate Code, N.J.S.A. 3B:1-1 et seq., vests the Superior Court with comprehensive authority over Will disputes, trust administration, and fiduciary accountings. The court catalogued the relevant provisions, including but not limited to:

  • N.J.S.A. 3B:2-2 grants the Superior Court "full authority to hear and determine all controversies respecting wills, trusts[,] and estates, and full authority over the accounts of fiduciaries, and also authority over all other matters and things as are submitted to its determination under this title."

  • N.J.S.A. 3B:3-17 during probate, the Superior Court "may take depositions to wills[,] admit the same to probate, and grant . . . letters testamentary or letters of administration with the will annexed."

  • N.J.S.A. 3B:3-18 requiring that to "prove the transfer of any property or to nominate an executor, a will must be admitted to probate."

Against this backdrop, the court reaffirmed and expressly adopted what had been an observation in its prior unpublished opinion: “arbitration clauses that eliminate the courts’ expected role in resolving Will disputes are inconsistent with the detailed statutory scheme vesting the superior courts with the authority to adjudicate such issues.” Accordingly, enforcement of an arbitration clause in a testamentary instrument is contrary to both the Probate Code and New Jersey’s contract principles. The court held:

We conclude enforcement of an arbitration clause in a testamentary instrument is contrary to the court’s role underlying the Probate Code and inconsistent with our State’s contract principles.

What This Means for Estate Planning in New Jersey

The Hekemian decision settles a question that had been lingering in New Jersey estate practice for years. Estate planners and their clients should take note of several practical implications.

  • Arbitration clauses in Wills are unenforceable in New Jersey. Regardless of a testator’s intent, an arbitration provision in a Last Will and Testament cannot compel beneficiaries, heirs, or other interested parties to resolve their disputes outside of court. Any such provision should be considered a nullity.

  • Testamentary trusts are also covered. The court’s holding extends to disputes concerning trusts created under a Will, not merely the Will itself. The arbitration clause in the Will purported to cover disputes “regarding the interpretation of this Will and the trusts created hereunder” — both were held unenforceable.

  • The result is the same regardless of mutual assent. Even if a testator and their spouse executed reciprocal Wills containing identical arbitration clauses, and even if the surviving spouse received benefits under the Will, that is insufficient to establish the knowing, voluntary waiver of court rights required under Atalese.

  • Inter vivos trusts are a different question. The Hekemian decision addresses testamentary instruments — Wills and trusts created by Wills. Arbitration clauses in standalone inter vivos trusts, which are contractual instruments, may be treated differently.

  • Will disputes belong in court. Beneficiaries and interested parties who find themselves in estate disputes in New Jersey have a right to litigate those disputes in the Superior Court, Chancery Division, Probate Part — and a testator cannot take that right away through a provision buried in their Will.

A Practical Note for Families

For families navigating an estate dispute in New Jersey, the Hekemian decision is significant. If a co-executor or trustee attempts to invoke an arbitration clause in a Will to divert your dispute out of court, that clause is unenforceable. You are entitled to pursue your claims — whether exceptions to an accounting, removal of a fiduciary, or other relief — in the Superior Court under the full protections of New Jersey law.

For those in the estate planning process, this decision underscores the importance of working with an experienced New Jersey estate planning attorney who stays current with developments in the law. Estate planning documents should reflect the current legal landscape, not aspirational provisions that courts will not enforce.

Does Medicaid Take Your House When You Die in New Jersey?

Does Medicaid Take Your House When You Die in New Jersey?

by | May 5, 2026 | Estate Administration, Estate Planning, Medicaid, Probate

It is one of the most common questions elder law attorneys hear: “If my parent goes on Medicaid, does the state get the house when they die?” The short answer is: it depends — and the details matter enormously.

New Jersey, like every other state, operates a Medicaid Estate Recovery Program (MERP). Under federal law, states are required to seek reimbursement from the estates of Medicaid recipients for long-term care costs paid on their behalf. The home — often the only significant asset remaining at death — is frequently the target. But the rules governing when and how New Jersey can pursue recovery are specific, and with proper planning, recovery can often be minimized or avoided entirely.

This post explains how New Jersey’s Medicaid estate recovery program works, what protections exist, and what families can do to protect a home and other assets.

What Is the Medicaid Estate Recovery Program?

The Medicaid Estate Recovery Program is administered in New Jersey by the Division of Medical Assistance and Health Services (DMAHS). Under both federal law and New Jersey law, DMAHS is required to seek reimbursement from the estates of deceased Medicaid beneficiaries for all Medicaid payments made on their behalf for services received at age 55 or older.

This is a point that catches families off guard. Medicaid’s eligibility asset rules during the recipient’s lifetime exempt the home from the $2,000 asset limit, provided the recipient intends to return home or a spouse or dependent relative lives there. But that exemption during life does not protect the home from recovery after death. The state is effectively deferring its claim until the recipient passes.

Recovery is not limited to nursing home care. Under New Jersey’s rules, DMAHS recovers for all Medicaid payments made on behalf of a recipient age 55 or older, including:

  • Nursing facility care

  • Home and community-based services, including MLTSS

  • Capitation payments (the cost of the Medicaid plan) made to managed care organizations on the recipient’s behalf — even if no specific services were rendered

  • Hospital and prescription drug costs related to long-term care

This broad scope means that recipients of home-based care programs are equally subject to estate recovery as nursing home residents. Families who chose home-based care assuming it carried no recovery risk should be aware of this.

What Does New Jersey Count as Part of the Estate?

New Jersey’s definition of “estate” for recovery purposes is broad — and broader than the probate estate in important ways. Under NJ DMAHS rules, an estate includes any property that belonged to the deceased at the time of death or at the moment prior to death, including:

  • The decedent’s home or share of a home

  • Bank accounts — whether solely or jointly held

  • Trusts and annuities

  • Stocks and bonds

  • Any other real or personal property

Critically, New Jersey’s rule extends to jointly held property. Even though a jointly held bank account or home typically passes to the surviving joint owner outside of probate — by operation of law — New Jersey treats the deceased recipient’s share as part of the recoverable estate. This is an area where New Jersey’s rules are particularly aggressive compared to some other states, which limit recovery to the probate estate only.

Families who added an adult child to a parent’s bank account or deed as a matter of convenience should understand that this titling arrangement may not protect those assets from MERP. See my earlier post on joint bank accounts and Medicaid eligibility for how account titling creates problems both during the Medicaid application process and after death.

When Will New Jersey Not Pursue Recovery?

Recovery is not automatic upon death. New Jersey is prohibited from pursuing estate recovery — or must defer its claim — under the following circumstances:

Surviving Spouse

DMAHS will not pursue recovery while a surviving spouse is alive. Recovery is deferred until after the spouse’s death. At that point, New Jersey may seek recovery from whatever remains in the estate — including assets that passed from the Medicaid recipient to the surviving spouse. This is an important planning consideration, particularly for couples who did not pursue Medicaid planning before the first spouse’s death.

Surviving Child Under 21

Recovery is deferred while the recipient has a surviving child under the age of 21. Once the child reaches 21, or upon the child’s earlier death, DMAHS may pursue recovery from remaining estate assets.

Blind or Permanently Disabled Child

Recovery is deferred while the recipient has a surviving child who is blind or permanently and totally disabled under Social Security standards. Recovery may be pursued after that child’s death or if the disability no longer applies.

Cost-Effectiveness

DMAHS has discretion not to pursue recovery if it determines that doing so would not be cost-effective. In practice, this exception applies to very small estates where the administrative cost of collection would outweigh the recovery amount.

The Hardship Waiver: Narrow in New Jersey

Federal law requires all states to offer a hardship waiver — a mechanism by which the estate representative can seek to have DMAHS waive or reduce its recovery claim based on undue hardship to the beneficiaries. Some states have adopted generous hardship waiver standards. New Jersey has not.

⚠️ Important: New Jersey’s hardship waiver rules are among the strictest in the country.   Under N.J.A.C. 10:49-14.1(h), New Jersey recognizes hardship only in very limited circumstances: when the deceased’s property is the sole source of income for one or more surviving family members, and pursuing recovery would likely cause those survivors to become eligible for public assistance or Medicaid. A waiver may also be considered if it would not be cost-effective to pursue recovery.

This standard is significantly narrower than the federal guidance, which suggests states also waive recovery against homes of modest value, income-producing family farms or businesses, and other compelling circumstances. New Jersey has not adopted those broader protections.

The practical consequence is that most NJ families who would otherwise qualify for a hardship waiver in other states will not qualify in New Jersey. An adult child who lived in and cared for a parent’s home, for example, would not qualify for a waiver simply because they stand to lose their residence — unless they can demonstrate they have no other source of income and would be driven to public assistance.

How New Jersey Places and Enforces Liens

When a Medicaid recipient dies and the conditions for recovery are met — no surviving spouse, no qualifying child — DMAHS will seek to be repaid up to the amount of all Medicaid assistance provided for services received at age 55 or older, including all capitation payments.

New Jersey does not typically force the immediate sale of a home to satisfy a MERP claim. However, there is an important exception to the deferral rule for family members residing in the home. Under New Jersey’s rules, if a family member of the deceased Medicaid beneficiary had continuously resided in the home prior to the beneficiary’s death, and the home was the beneficiary’s primary residence and remains the family member’s primary residence, DMAHS may record a lien against the property but will not enforce it until:

  • The property is voluntarily sold

  • The resident family member dies

  • The resident family member vacates the property

This deferral can provide meaningful relief for a family member — often an adult child caregiver — who has been living in the home. But it is a deferral, not a waiver. The lien remains. When any of the triggering conditions occur, DMAHS will pursue its claim from whatever value remains in the property.

Life Insurance, Annuities, and Burial Trusts

Life Insurance

Proceeds from life insurance policies are generally considered assets of the named beneficiaries — not the estate — and are therefore not subject to recovery, provided a beneficiary other than the estate is named. However, if a named beneficiary predeceases the Medicaid recipient and the estate becomes the default beneficiary, those proceeds become recoverable.

Annuities

Annuities that were not liquidated prior to Medicaid eligibility must name the State of New Jersey as the remainder beneficiary in the primary position — or secondary position if there is a community spouse or qualifying child. Upon the recipient’s death, the state collects any remaining principal or income from the annuity before any other beneficiary receives a distribution.

Irrevocable Funeral Trusts

Under New Jersey law, any funds remaining in an irrevocable funeral trust after reasonable funeral expenses have been paid must be forwarded to DMAHS if the deceased received Medicaid or public assistance benefits. This applies equally to burial insurance policies.

What the Estate Is Required to Do

The obligation to notify DMAHS falls on whoever is handling the estate — whether an executor, administrator, or family member. Under New Jersey’s rules, the estate representative must contact DMAHS in writing as soon as possible after the Medicaid recipient’s death to determine whether a claim exists. This notice must be sent before any assets are distributed to creditors or heirs (with the exception of reasonable funeral expenses).

Distributing estate assets to heirs before satisfying a DMAHS claim can expose the executor or administrator to personal liability. Written notice should be sent to:

DMAHS Office of Legal and Regulatory Affairs
Attn: Estates
PO Box 712 — Mail Code #6
Trenton, NJ 08625  
Phone: 609-588-3016

How to Protect Your Home and Assets From Estate Recovery

The most important thing to understand about Medicaid estate recovery is that it is largely avoidable with proper advance planning. The strategies that work best require time — ideally years — before a Medicaid application is filed.

  • Medicaid Asset Protection Trust (MAPT): Transferring a home or other assets into an irrevocable Medicaid Asset Protection Trust removes those assets from the recoverable estate, provided the transfer occurs more than five years before a Medicaid application. Assets held in a properly structured MAPT are not subject to MERP because they are no longer owned by the Medicaid recipient at death. This is the single most effective tool for protecting a home from estate recovery.

  • Life Estate Deed: A life estate deed transfers remainder interest in the home to children or other heirs while the owner retains the right to live there for life. However, this type of transfer must be made more than 5 years before the first Medicaid application. This strategy should only be used if the plan is to stay in the home permanently. If the Medicaid recipient vacates the home or if it is sold, it may affect the home's exempt status under Medicaid rules or be considered a receipt of assets. There are nuances to this approach and it is not appropriate in all situations.

  • Spousal planning: A home transferred to a community spouse during the Medicaid recipient’s lifetime can be considered an exempt asset.  Proper titling and estate planning for the community spouse can limit what remains in a recoverable estate at the survivor’s death. There are also potential pitfalls to be aware of such as the unexpected death of the community spouse before the Medicaid recipient.

  • Beneficiary designations and joint ownership: Unlike some states, New Jersey reaches jointly held property and certain non-probate assets for recovery purposes. Families should not assume that a joint account or payable-on-death designation will shield assets from MERP in New Jersey.

For a broader discussion of Medicaid planning strategies available to married couples, including some that require a more difficult conversation, see my post on Divorce as a Medicaid Planning Strategy in New Jersey.

Final Thoughts

New Jersey’s Medicaid Estate Recovery Program is real, it is active, and it reaches further than most families expect — including jointly held property, home-based care recipients, and assets that pass outside of probate. The hardship waiver is available in theory but rarely granted in practice under New Jersey’s narrow standards. The families who successfully protect their homes and assets are almost always the ones who planned ahead. If you or a loved one is aging or dealing with health concerns, the question of Medicaid estate recovery is worth discussing with an elder law attorney now — before a nursing home admission, before a Medicaid application, and before it is too late to take meaningful action.

Living With Family and Losing Medicaid: How In-Kind Support and Maintenance Works — and How a Simple Lease Can Fix It

Living With Family and Losing Medicaid: How In-Kind Support and Maintenance Works — and How a Simple Lease Can Fix It

by | Apr 28, 2026 | Consumer Advocacy, Medicaid, Medicaid Planning

A 70-year-old woman moves in with her adult son after a stroke. Her only income is $1,200 a month in Social Security. She applies for ABD Medicaid — New Jersey’s Medicaid program for the aged, blind, and disabled — and is told she is over the income limit, which in 2026 is $1,330 for a single person. But she earns only $1,200 a month. How is she over income?

The answer is a rule called In-Kind Support and Maintenance, or ISM. It is one of the most commonly misapplied rules in the Medicaid and SSI world, and one of the most fixable. In many cases, a written lease and a monthly rent payment is all it takes to bring an otherwise-qualifying applicant into eligibility. The problem is that many New Jersey counties are still applying an old version of the rule — even though federal regulations changed nationwide in September 2024 to become significantly more favorable to applicants.

What Is In-Kind Support and Maintenance?

ISM is the Social Security Administration’s term for non-cash assistance provided to an SSI or Medicaid recipient in the form of shelter. When someone else provides or pays for your housing — rent, mortgage payments, utilities, real property taxes, garbage collection — SSA treats that assistance as a form of income, even though no money actually changes hands. That imputed income counts against program income limits.

Food was also part of ISM calculations until September 30, 2024, when SSA eliminated it. Food assistance from any source — whether a family member buys groceries, takes someone to dinner, or otherwise provides meals — is no longer counted as income for SSI or Medicaid purposes. Only shelter remains.

ISM is relevant to both SSI and ABD Medicaid in New Jersey. SSI recipients are automatically eligible for NJ Medicaid. But individuals who do not receive SSI — those whose Social Security income exceeds the SSI limit but who are still below the ABD Medicaid income threshold — can be knocked over that threshold by ISM, even though their actual cash income is within the limit. For more background on how SSI and ABD Medicaid interact in New Jersey, see my post on SSI and Medicaid Eligibility in New Jersey.

How ISM Is Valued: The VTR and PMV

ISM is valued using one of two methods, depending on the living arrangement.

The Value of the One-Third Reduction (VTR) applies when the applicant lives in another person’s household and receives both shelter and all meals from the household. Under the VTR, SSA reduces the SSI benefit by exactly one-third of the Federal Benefit Rate — a flat reduction regardless of what the support is actually worth.

In all other shelter-related ISM situations, SSA uses the Presumed Maximum Value (PMV) rule. The PMV is a cap on the amount of ISM that can be imputed — for 2026, it is $351.33 per month (one-third of the federal SSI benefit rate plus $20). Even if a person receives more in free rent, the maximum income SSA will impute is the PMV. For an ABD Medicaid applicant who is not on SSI, the PMV is added to their actual cash income for purposes of the eligibility calculation.

📋 Example:   Maria, age 70, lives with her son and pays no rent. Her only income is $1,200/month in Social Security.   Without a lease: SSA imputes $351.33 in ISM shelter. Maria’s countable income = $1,551.33. She is over the 2026 ABD Medicaid income limit despite having no additional cash income.   With a qualifying lease: No ISM is imputed. Maria’s countable income remains $1,200/month — within the ABD Medicaid limit.

The Fix: The Business Arrangement Rule

This is where the 2024 rule change matters most. Under the revised federal regulation effective September 30, 2024, SSA will not charge ISM in the form of room or rent if the applicant pays rent under a “business arrangement.”

📌 2024 Rule Change (20 CFR 416.1130(b)):   A business arrangement now exists — and no ISM is charged — when the monthly rent required under the lease equals or exceeds the Presumed Maximum Value (PMV).   This standard applies nationwide, to all applicants and recipients, regardless of who the landlord is — including a family member. The PMV for 2026 is $351.33/month.

The practical consequence is significant. Before September 30, 2024, a New Jersey applicant living with a family member needed to pay their fair share of full market rent to avoid ISM — which could easily be $1,500 or more per month in many NJ markets. Under the current rule, rent at or above the PMV — currently $351.33 — is sufficient to establish a business arrangement and eliminate ISM entirely, regardless of what the market rent would be.

The rent must be paid under a genuine written lease and must actually be paid each month. SSA will verify the arrangement. A paper lease with no money changing hands will not survive scrutiny.

Why NJ Counties Are Still Getting This Wrong

⚠️ Important: Many NJ counties are still applying the pre-September 2024 ISM rules — requiring a fair share of rent at full market value rather than the PMV. This is denying benefits to applicants who are legally entitled to them.

The September 30, 2024 changes are federal regulatory changes that apply uniformly in New Jersey. Common errors being made post-2024 include: 1) continuing to require evidence of the applicant’s payment of their fair share of housing expenses, rather than the PMV, 2) continuing to request utility bills when that documentation is irrelevant, and 3) rejecting rental agreements. These are not technical errors with minor consequences. They result in real people being wrongly denied ABD Medicaid coverage they are legally entitled to.

What to Do If You Are Denied Based on ISM

If an ABD Medicaid application is denied — or an existing benefit is terminated — on the basis of ISM, the first step is to review the denial notice. New Jersey is required to explain the basis for the denial and the calculation used. If ISM was applied incorrectly, the applicant has the right to request a fair hearing.

What the Lease Needs to Include

To establish a business arrangement and eliminate ISM, the rental agreement should be in writing and reflect a genuine arrangement. At minimum, the lease should include:

  • The names of the landlord and tenant

  • The address and description of the space being rented

  • The monthly rent amount — at or above the PMV ($351.33 in 2026)

  • The lease term (month-to-month is acceptable)

  • A statement on whether it is inclusive of utilities including gas, electric, water, garbage, etc.

  • Signatures of both parties and the date of execution

Rent must actually be paid each month and documented. Payment by check or money order with a clear notation that it is a rent payment is recommended. Electronic transfers through Zelle, Venmo, or PayPal may be accepted but should include a note identifying the payment as rent for the relevant period. Such payments should be consistent (made around the same date each month) and partial payments should be avoided. Cash payments without documentation create evidentiary problems and should be avoided.

Final Thoughts

The ISM rules affect some of the most financially vulnerable people in New Jersey — elderly individuals and people with disabilities living on fixed incomes in family households. For this population, ABD Medicaid is not a secondary benefit. It covers their medical care, prescriptions, and often their long-term care services. The fix — a written lease with documented monthly rent at or above the PMV — is one of the simplest solutions in elder law and benefits planning.

Who Makes Decisions for a Spouse or Family Member During a Medical Emergency in New Jersey

Who Makes Decisions for a Spouse or Family Member During a Medical Emergency in New Jersey

by | Apr 21, 2026 | Estate Planning, Guardianship, Living Will, Power of Attorney

Your spouse is rushed to the hospital. The doctors need to make critical decisions about their treatment. Who has the legal right to make those decisions? Who has access to information? And what happens when adult children — or stepchildren — disagree with what you want?

These are not hypothetical questions. They play out in New Jersey hospitals and emergency rooms regularly, and the answers depend almost entirely on whether the incapacitated person planned ahead. This post explains the legal framework governing spousal rights in a medical emergency in New Jersey, and why the absence of proper documents can turn a medical crisis into a legal one.

The Fundamental Right to Control Your Own Medical Care

New Jersey law starts from a clear premise: every competent adult has a fundamental right to make their own health care decisions, including the right to refuse treatment. This right does not disappear simply because a person becomes ill or loses the ability to speak for themselves. The New Jersey Advance Directives for Health Care Act, N.J.S.A. 26:2H-53 et seq., is built around the principle that a person’s documented wishes must be honored even when they can no longer communicate them directly.

The problem arises when a person loses decision-making capacity — whether temporarily due to a medical procedure, or permanently due to a stroke, dementia, or traumatic injury — and has not left clear instructions or designated someone to act on their behalf. In that vacuum, conflict among family members is not just possible. It is common.

Scenario 1: Your Spouse Has an Advance Directive

An Advance Directive is the umbrella term under New Jersey law for two related documents: a Proxy Directive (Healthcare Proxy or Durable Power of Attorney for Healthcare), which designates a specific person to make medical decisions, and an Instruction Directive (Living Will), which sets out the patient’s specific wishes regarding treatment. The basics of Living Wills are covered in an earlier post: Understanding Living Wills: Why They Matter and How to Create One.

When a valid Advance Directive is in place and designates a Health Care Representative, that person — and that person alone — has legal authority to make medical decisions once the patient is determined to lack decision-making capacity. If the spouse is designated as the Health Care Representative, they have clear legal authority under N.J.S.A. 26:2H-61. Healthcare providers are required to treat the Health Care Representative’s decisions as if they came from the patient directly. Adult children, stepchildren, siblings, and other family members have no legal standing to override those decisions, regardless of how strongly they feel about the matter.

One critical note: under N.J.S.A. 26:2H-57(c), a designation of a spouse as Health Care Representative is automatically revoked upon divorce or legal separation. If your spouse’s Advance Directive was executed during a prior marriage and never updated, the former spouse no longer has authority — and there may be no designated representative at all.

Scenario 2: Your Spouse Has No Advance Directive

This is where the situation becomes significantly more complicated. When there is no Advance Directive, New Jersey does not have a formal statutory surrogate decision-making law that automatically grants the spouse legal authority to make medical decisions. Instead, the law operates through a combination of common practice, hospital or medical facility policy, and the general principles of the NJ Advance Directives Act.

In practice, New Jersey hospitals and healthcare providers follow a default hierarchy when a patient lacks both capacity and an Advance Directive. The spouse or domestic partner is generally treated as the presumptive decision-maker first, followed by adult children, then parents, then other next of kin. However, this default hierarchy is not codified as a rigid legal rule in the same way it is in some other states. It is a practical framework that healthcare providers follow, and it can break down when family members disagree — particularly when adult children from a prior relationship contest the spouse’s authority. When disputes are not resolved amicably, this often will lead to legal action.

When Children and Stepchildren Get Involved

This is the most emotionally charged and legally murky area of healthcare decision-making, and it arises more frequently in blended families than most people expect.

Consider a common scenario: a man remarries later in life. He has adult children from his first marriage who have a complicated relationship with his new wife. He is hospitalized following a stroke and cannot communicate his wishes. He has no Advance Directive. His wife believes he would not want aggressive intervention; his adult children disagree and want every available treatment pursued. Who wins?

Without an Advance Directive, there is no definitive legal answer under New Jersey law. In the absence of a designated Health Care Representative, N.J.S.A. 26:2H-64 provides that an Instruction Directive (Living Will) alone — without a named proxy — can guide treatment decisions. But if there is no document at all, the decision-making process defaults to the attending physician, guided by the patient’s known preferences, family input, and the hospital’s ethics committee if necessary.

Stepchildren have no automatic legal standing under New Jersey law to make healthcare decisions for a step-parent. Neither do biological children, for that matter, if a spouse has been designated as Health Care Representative. But in the absence of any legal designation, healthcare providers must navigate competing family voices without clear legal authority to resolve the dispute — which can result in delayed treatment, institutional ethics committee referrals, or in many cases, court-ordered guardianship.

How New Jersey Handles Family Disputes

The New Jersey Advance Directives for Health Care Act contains a dispute resolution mechanism under N.J.S.A. 26:2H-66. When disagreements arise about a patient’s care — whether over the interpretation of an Advance Directive, the patient’s decision-making capacity, or the appropriate course of treatment — any interested party can invoke the dispute resolution process established by the healthcare institution. Most hospitals in New Jersey maintain ethics committees for exactly this purpose.

In cases where the dispute cannot be resolved through the hospital’s internal process, or where there is no appropriate decision-maker available, a court can intervene and appoint a guardian under New Jersey’s guardianship statutes. Guardianship proceedings in this context are filed in the Superior Court, Chancery Division, Probate Part, in the county where the incapacitated person resides.

For more on how guardianship works in New Jersey, see our post: Understanding Guardianship in New Jersey: Why It May Be Necessary and How to Obtain It.

A Note on HIPAA and Medical Information

Even before the question of decision-making authority arises, a spouse may face a more immediate obstacle: access to medical information. Under the federal Health Insurance Portability and Accountability Act (HIPAA), healthcare providers are prohibited from disclosing a patient’s medical information without authorization. In an emergency, providers will typically share information with a spouse as the presumptive next of kin. But in situations where family relationships are contested or communication is disrupted, a spouse may find themselves unable to get basic information about their partner’s condition.

A HIPAA authorization — a separate document designating who may receive medical information — can address this gap. Many comprehensive Advance Directive forms include one. If your spouse’s Advance Directive does not include a HIPAA authorization, it is worth asking your attorney about adding one.

What Every New Jersey Resident Should Do

The good news is that all of the scenarios described above are preventable with proper planning. Here are steps that everyone — especially people in blended families — should take:

  • A Proxy Directive (Healthcare Proxy): Designates a specific person to make medical decisions and eliminates any ambiguity about who is in charge. Should include an alternate designee in case the primary is unavailable.

  • An Instruction Directive (Living Will): Documents the patient’s specific wishes about life-sustaining treatment, artificial nutrition, resuscitation, and other critical decisions. Reduces the burden on the Health Care Representative and minimizes the grounds for family disputes.

  • A HIPAA Authorization: Ensures that designated individuals can receive medical information even in ambiguous situations.

  • A conversation with your family: Documents are only as effective as the communication surrounding them. Adult children — biological and step — should know what documents exist, how to access the originals, who is designated, and what the patient’s wishes are. Surprises at the hospital are often the root cause of conflict.

  • Regular review and updates: Advance Directives should be reviewed after major life events — a new marriage, a divorce, a serious diagnosis, or a change in the patient’s treatment preferences. A document executed ten years ago may no longer reflect current wishes or circumstances.

The State of New Jersey provides free Advance Directive forms through the New Jersey Department of Health. These are available at:

NJ Department of Health — Advance Directive Forms and FAQs.

While these forms are legally valid when properly filled out, signed and witnessed, they are not a substitute for individualized legal counsel — particularly for blended families, individuals with complex medical histories, or anyone whose family dynamics suggest the possibility of conflict.

Final Thoughts

A medical emergency is not the time to be resolving questions about who has legal authority to make decisions. By the time those questions arise, it is often too late to execute new documents, and the resulting disputes can cause lasting damage to family relationships on top of the medical crisis itself.

The rights of a spouse in a medical emergency are clear when proper documents are in place — and deeply uncertain when they are not. If you, your spouse or any adult family members have not yet executed Advance Directives, or if your existing documents are outdated, contact your attorney to schedule a consultation.







The 5-Year Lookback Rule in New Jersey: What It Is, How It Works, and Why Timing Matters

The 5-Year Lookback Rule in New Jersey: What It Is, How It Works, and Why Timing Matters

by | Apr 14, 2026 | Medicaid, Medicaid Planning

Of all the rules that govern Medicaid eligibility in New Jersey, none catches families more off guard than the 5-year lookback rule. The concept sounds simple enough: before approving a Medicaid application for long-term care, New Jersey reviews the applicant's financial history for the prior five years. What families don't realize — until it's often too late — is just how broadly that review sweeps, and how severely it can delay access to benefits.

This post explains how the lookback rule works in New Jersey, what triggers a penalty, how the penalty is calculated, what transfers are exempt, and what options remain if you or a loved one is already in a crisis situation.

What Is the 5-Year Lookback Rule?

When a New Jersey resident applies for Medicaid long-term care benefits through the Managed Long Term Services and Supports (MLTSS) program the county welfare agency where the application is filed reviews every financial transaction the applicant made during the 60 months immediately before the application date. This 60-month window is called the lookback period.

The purpose of the rule is straightforward: Medicaid is a needs-based program with a strict asset limit of $2,000 for an individual applicant. Without the lookback rule, people could simply give away all of their assets to family members on Monday and apply for Medicaid on Tuesday. The lookback rule is designed to prevent that.

Verification Process

Applying for Medicaid long-term care in New Jersey requires submitting five years of financial records — bank statements, investment account statements, and documentation of all significant transactions. This is not a casual review. The county welfare agency assigned to process the application will scrutinize every deposit, withdrawal, and transfer during the lookback period looking for transactions that cannot be explained.

When the county identifies a transaction it cannot reconcile — a large deposit or withdrawal, an unexplained pattern of transactions, a transfer that does not have an obvious explanation — it will issue a Request for Information letter, commonly known as an RFI. The RFI identifies the transaction or transactions at issue and asks the applicant to explain and document them.

Here is where the process becomes unforgiving. While the county routinely takes weeks or months to process a Medicaid application, the applicant typically has only 14 days to respond to an RFI. An extension can be requested, and if the county grants one it will be only for an additional 14 days at a time. That presents quite a stressful situation because it can take months to locate, organize, and submit documentation that in some cases covers transactions from years earlier.

A written explanation alone will not satisfy the county. Documentation is required — and it usually must exactly match the transaction in question. Acceptable documentation typically includes receipts, invoices, bank deposit slips, check images, wire transfer records, or other records that tie directly to the specific transaction. A general statement that “this money was used for home repairs” is not sufficient. The county wants a contractor’s invoice for the specific amount, paid on or around the date of the transaction.

If the response to an RFI is insufficient — whether because documentation is unavailable, incomplete, or does not match the transaction — the county will treat the transaction as an unexplained transfer and deny the application or impose a penalty period accordingly. Unexplained withdrawals are treated the same way. A cash withdrawal of $5,000 with no supporting documentation may be deemed a disqualifying transfer even if the money was spent on legitimate expenses, simply because there is no paper trail to prove it.

The practical lesson is one that cannot be overstated: keep records. Anyone who may need Medicaid long-term care in the future — or whose family member may — should maintain organized financial records going back at least five years. Bank statements, canceled checks, receipts for significant expenditures, and documentation of any large transactions should be preserved and accessible. By the time the RFI arrives, it is too late to reconstruct a paper trail that was never created.

What Transfers Trigger a Penalty?

Any transfer of assets for less than fair market value made during the lookback window is potentially subject to a penalty. The county does not limit its review to large or obvious transactions. Common transfers that trigger penalties include:

  • Adding an adult child to a bank account as a joint owner and intermingling funds (see my post on joint bank accounts and Medicaid eligibility for how account titling can create problems)

  • Transferring the deed to a home to a child or other family member for less than full market value

  • Paying a family member for caregiving services without a formal written personal care agreement

  • Donations to charities or religious organizations

  • Selling property — real estate, a vehicle, collectibles — below market value

  • Funding an irrevocable trust within the lookback period

  • Cash gifts to children, grandchildren, or other family members, including annual holiday or birthday gifts

That last point deserves emphasis. There is no de minimis exception in New Jersey. The IRS gift tax annual exclusion — $19,000 per recipient in 2026 — has absolutely no bearing on Medicaid’s lookback rules. A family that has been making annual gifts for estate planning purposes under the IRS rules may have unknowingly created a significant Medicaid penalty problem.

How the Penalty Period Is Calculated

When the county identifies a disqualifying transfer, it imposes a penalty period — a period of time during which the applicant is ineligible for Medicaid benefits even though they are otherwise financially and medically eligible. The penalty is not a fine. It is a denial of long term care benefits.

The length of the penalty period is calculated by dividing the total value of disqualifying transfers by a number called the “penalty divisor.” The penalty divisor is a figure set by the state every year that reflects the average daily cost of private-pay nursing home care in New Jersey. As of April 1, 2026, New Jersey’s daily penalty divisor is $420.67. This figure is important to track. For example a decrease in the divisor occurred in 2025, which effectively lengthened the penalty period for the same transfer amount.

📊 Example Calculation   A New Jersey resident transferred $100,000 to their adult children within the lookback period and has no other disqualifying transfers.   Penalty Period = $100,000 ÷ $420.67 = approximately 237 days of Medicaid ineligibility   During those 237 days, the applicant must pay for their long-term care entirely out of pocket — even though they have already spent down their assets and would otherwise qualify.

There is no cap on the length of the penalty period. A large enough transfer can result in years of ineligibility.

Transfers That Are Exempt From the Lookback

Not every transfer triggers a penalty. New Jersey law recognizes several categories of exempt transfers:

  • Transfers to a spouse: Assets transferred to a community spouse are not penalized (though some assets may need to be spent down to meet resource eligibility requirements). This is the foundation of several legitimate Medicaid planning strategies, including the Medicaid divorce strategy I discussed in a prior post.

  • Transfers to a blind or permanently disabled child: Assets transferred to or for the sole benefit of a child who is blind or permanently and totally disabled are exempt. However, if the child receives SSI or Medicaid, transferring liquid assets directly to them may jeopardize their own benefits. In those cases, a Special Needs Trust is typically the appropriate vehicle. See my post on Special Needs Trusts vs. ABLE Accounts.

  • Transfer of the home to a caregiver child: If an adult child lived in the parent’s home for at least two years before the parent’s institutionalization and provided care that demonstrably delayed the need for nursing home placement, a transfer of the home to that child is exempt from the lookback penalty.

  • Transfer of the home to a sibling with equity interest: If a sibling of the applicant had an equity interest in the home and resided there for at least one year before the applicant’s institutionalization, a transfer of the home to that sibling is exempt.

  • Transfers for fair market value: Any asset sold or transferred at full, documented fair market value does not trigger a penalty, because no asset has effectively been given away.

The Penalty Start Date: Why the Timing Makes It Worse

One of the most counterintuitive and devastating features of the lookback penalty is when it begins to run. Many families assume that the penalty period starts at the time of the transfer. It does not.

Under New Jersey Medicaid rules, the penalty period begins on the later of: (1) the date the applicant would otherwise be eligible for Medicaid — meaning they meet both the asset and income requirements — or (2) the date the applicant is actually residing in a nursing facility. In practical terms, this means the penalty period cannot start running until the person is in a nursing home, has already spent down to the $2,000 asset limit, and has applied for Medicaid.

The Single Most Important Takeaway

The 5-year lookback rule is unforgiving in one specific way: the clock starts running when the transfer is made, not when the application is filed. This means that the most powerful Medicaid planning strategies — irrevocable trusts, strategic gifting, asset restructuring — require a five-year runway to be fully effective. A Medicaid Asset Protection Trust funded today does not fully protect those assets until five years and a day from now.

The families who fare best are the ones who start planning before a crisis occurs. If you are over 60, have aging parents, or have reason to believe that long-term care may be needed within the next decade, the time to have a Medicaid planning conversation with an elder law attorney is now.

Final Thoughts

The 5-year lookback rule is one of the most consequential — and most misunderstood — rules in New Jersey Medicaid law. Transfers that seem entirely innocent — an annual gift to a grandchild, adding a child’s name to a bank account, deeding a home to a son or daughter — can result in months or years of Medicaid ineligibility at the worst possible moment. Understanding the rule, the exceptions, and the planning options available is essential for any New Jersey family facing the prospect of long-term care.