Management of an Insolvent Estate in New Jersey
Traditional estate planning is primarily designed to ensure that your belongings and assets pass in an orderly manner after your death, and that they reach the people you intend. That’s an important and admirable goal, but overlooks many critical issues. Just as writing your own will using a form or template can put you and your family at risk, an estate law firm that offers a simple will without advising you of the other issues you should be considering does you a significant disservice.
Failing to look beyond the passing of assets can leave you:
- Without access to care you need later in life
- With the wrong person making decisions if you become incapacitated
- Unnecessarily dissipating your assets during later life or a medical crisis
- Without assets to pass to your loved ones
Life care planning considers these and other issues, with the goal of creating a multi-faceted plan that will provide for your needs during your lifetime and your heirs when you’re gone.
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Life Care Planning Protects Your Future and Your Family
The average life expectancy in New Jersey is 80.9 years. With people living longer, it’s no surprise that life care planning is growing in popularity. The average New Jersey resident can expect to live about 15 years beyond retirement. Of course, it’s impossible to predict how long we’ll live, or what type of care might be required during those later years.
A well-crafted life care plan will:
- Ensure that the elderly or disabled person has access to the care he or she needs, whether that means assistance at home or long-term residential care
- Identify sources of assistance in paying for long-term and other care, including both government sources and private options
- Preserve assets to the greatest degree possible while meeting the family’s needs
While many of these needs can be addressed with legal strategy and documents, there’s much more involved in protecting and providing for multiple generations and preparing for a wide range of possible needs.
Full Service Life Care Planning Assistance
Attorney Andrey Milvidskiy has decades of experience in estate planning, elder care, and related matters. He and his dedicated team have developed a trusted network of seasoned professionals to help guide families through every aspect of life care planning. This includes senior care advisers, care managers, accountants, financial advisors and others who can address the physical, medical, financial, practical, and even emotional needs of a family engaging in life care planning.
In addition to preserving assets and securing access to necessary care, this type of professional guidance and advance planning can help the elderly or disabled person to be more comfortable, receive the services best tailored to his or her needs, and in some cases even remain at home longer.
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Who Needs a Life Care Plan?
Life care planning, like traditional estate planning, requires advance preparation. While it’s never too late to find the best approach available in the moment, there are significant advantages to engaging in certain types of planning early. For example, the most effective Medicaid planning will commence more than five years before care is required.
Though you can’t know exactly when you or a loved one may require in-home assistance, long-term care, Medicaid coverage, or other services, there are warning signs. If you don’t already have a life care plan in place, you should seriously consider consulting a life care planning attorney as soon as:
- You or an elder family member begins to show signs of cognitive deterioration
- You or an elderly family member requires assistance with day-to-day tasks
- You or a family member have been diagnosed with a serious chronic or terminal medical condition
Whether you’ve seen warning signs and need to prepare for the relatively short-term future or are educating yourself to create a plan for the future, Milvidskiy Law Firm can help. Just fill out our online contact form or call 1-888-893-0999 to learn more.
An insolvent estate isn’t necessarily an estate without assets. Just like a living person, an estate may hold assets—even significant assets—and still lack funds to pay all of its outstanding debts. Management of an insolvent estate requires special care on the part of the personal representative, because New Jersey law sets forth an order of priorities for payment of debts.
The personal representative (sometimes referred to as the “administrator” or “executor”) is responsible for ensuring that the highest priority creditors and expenses are paid before funds are distributed to lower-priority claims. Under some circumstances, the personal representative may even be personally liable for funds paid out to a claimant or creditor who should not have been paid.
Order of Priority for New Jersey Estate Claims
When an estate has insufficient assets to pay all outstanding debts, the personal representative is required to allocate payment in the following order of preference:
- Reasonable funeral expenses
- Costs and expenses of administration
- Debts for the reasonable value of services rendered to the decedent by the Office of the Public Guardian for Elderly Adults
- Debts and taxes with preference under federal law or the laws of this State
- Reasonable medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him
- Judgments entered against the decedent according to the priorities of their entries respectively
- All other claims
Note that beneficiaries of the estate aren’t specifically listed: they don’t come in until the “all other claims” category at the very end of the list. This is important information for a personal representative managing an insolvent estate or an estate that may turn out to be insolvent when all of the claims are received and tallied. Often, family members and other listed beneficiaries put pressure on the personal representative to make distributions early in the estate settlement process. However, succumbing to that pressure can be risky for a personal representative who isn’t yet certain the estate has sufficient assets to cover all priority claims.
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It’s also important to know that creditors of the estate can’t jump the line by being the first to submit claims, or by employing aggressive tactics such as obtaining a judgment. All creditors and claimants at a priority level are treated equally, and then if funds remain, the personal representative moves on to the next level. For example, if all debts and costs in categories 1-4 have been paid, but there are insufficient funds remaining to compensate all medical providers, each will receive partial payment to the extent of the remaining estate assets. The personal representative may not choose to pay one medical provider in full and ignore the others.
Get Help Administering an Insolvent Estate
Managing an insolvent estate can be even more challenging than the typical estate administration process, with additional pitfalls for the personal representative. Fortunately, the cost of hiring an experienced probate attorney to guide the process and ensure that all of the personal representative’s duties are fulfilled according to New Jersey law falls into the second category—costs and expenses of administration. That means only funeral expenses take higher priority than the expenses associated with efficient and appropriate administration of the estate.
If you have been charged with administering an insolvent estate, or you are serving as personal representative and it is not yet clear whether the estate assets will cover all outstanding debts and expenses, consult an attorney experienced in estate administration. A knowledgeable guide can help you avoid costly missteps and resist pressure from aggressive creditors or beneficiaries who press for distributions before you have a clear picture of the net value of the estate.
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