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General Perry’s Terror Clause: Final Chapter (I think)

Within a couple weeks of oral arguments, we received a published opinion in the General Perry terror clause case that has been discussed in this blog before (really fast opinion).   To read the case, click here.

The result was not favorable to my client, but nonetheless appears to provide planners with the result advocated by our appeal – that is, there is no “safe harbor” tool with which to contest a terror clause.

To review, Beneficiary filed Motion to Determine Probable Cause.  Trial Court found no probable cause to contest the Trust, but refused to find that the act of bringing the motion was itself an attack on the Trust so as to invoke the terror clause penalty.

The Court of Appeals said that the trial court never should have accepted the motion to determine probable cause because it did not meet the jurisdictional requirements for the relief requested.  Because that issue was not raised at the trial level it was not preserved on appeal.  But the COA said that in this case the motion itself does not violate the terms of the terror clause of this trust.  Where that leaves us is – in our case the Beneficiary who brought the motion gets to keep his share of the trust – BUT in the future anyone who brings this type of motion should expect to have the motion dismissed without a hearing.  So the result is there is no safe harbor way to challenge a terror clause – but that doesn’t help my client.

The case is published – so it matters.  I had intended to seek leave to the Supreme Court if the Court of Appeals decision was not favorable.  But in light of the ruling, I think such an effort may not be warranted.  I thank Phil Harter (f.k.a. Judge Harter) of our office for his review and conclusions about the opinion.  Finally it should be noted that opposing counsel on this case, Doug Mielock, (a.k.a. my archnemisis) did an excellent job as usual – just hate losing to him.

The End of Life Tar Pit

I had the most amazing client interview the other day.  A retired attorney in a lockdown unit at an assisted living facility, placed there by his family and against his will.  Perfectly lucid, but deemed to be “unable to make informed decisions” by his doctors – not because he couldn’t understand and articulate his desires, but because the desires he expressed were unacceptable to the listeners: suicide. 

He could explain why he wanted to take his life, and it made sense:  his age, physical limitations, and bleak prospects for quality of life in the future.  I was particularly moved by one of his reasons: having been predeceased by his wife and other family members, he spoke of the possibility – as he said, the “outside chance”  – that he may be reunited with them at death. 

As an estate planner, it is hard not to get trapped in a fascination with the issue of end of life planning.   It is a new concept in the law, and clearly evolving.  Currently only a few states allow assisted suicide. Others states stumble through, as Michigan does, with surrogate decision making laws and guardianships.

Perhaps it is out of our own individual concerns about mortality, and having worked with the aged and infirm long enough to be particularly sensitive to the unpleasantries that often accompany the final phase of life, that estate planners can get so lost in the mire of this area of the law.

At times I think of the role of lawyers in society in terms of a metaphor.  There is a house that humanity resides in.  The dwellers allow only the scientists to go outside and look around, but demand that they come back in and explain that they see the hand of God in nature.  They allow only the lawyers to go into the basement, to inspect and maintain the foundation and utilities.  They demand that the lawyers are able to explain what they see in terms of justice and truth.  The people in the house don’t want to believe that the placement of rocks on which the house was built are the product of randomness – and so the lawyers do their part in keeping the house standing without offending those who dwell there. 

In looking at the way the law handles end of life, I feel this calling most acutely.  Society is faced with an unprecedented issue – we are living longer, but for many, the final years are without quality.  We have a hard time thinking about and talking about quality versus quantity in the context of human life.  So the lawyers struggle with how to explain the rules for ending life, when those rules must supposedly stand on the rocks of justice and truth.

Yes – I am trapped.  But please, don’t pull me out just yet. 

An Inconvenient Obstacle to Community Based LTC


Because asset protection strategies commonly used in the context of nursing home Medicaid are problematic in the context of MI Choice Waiver and PACE programs, a significant number of potential beneficiaries are disincentivized from pursuing these services.


PACE is the Program for All Inclusive Care that is operating in several parts of the State.  It is a unique and growing concept for long term care (“LTC”) that combines Medicare and Medicaid dollars for individuals who meet the Medicaid Level of Care requirements for long term care services.  In that combines Medicare and Medicaid money, PACE is especially interesting as it may anticipate something like what will come (if anything) from the current push for “integrated care” services.

Waiver or “MI Choice” is the home and community based Medicaid long term care benefit that provides benefits to Medicaid beneficiaries who meet the Medicaid Level of Care requirements for LTC services.  Services may be provided in the home or in those Assisted Living Facilities that participate in the program.

Both PACE and Waiver use the traditional Medicaid financial eligibility rules for nursing home Medicaid, but with an income cap.

Currently most PACE programs are looking to fill slots, whereas most Waiver programs are backlogged (but catching up).

Lawyers have long worked to qualify Medicaid beneficiaries in nursing homes while preserving assets for the spouse or other family members.  This practice area has grown dramatically in the past decade so that whereas a decade ago only a hand full of attorneys provided this type of advice and only a small percentage of nursing home residents took advantage of these asset protection strategies, today there are hundreds of lawyers in Michigan offering advice in this practice area and the majority of nursing home Medicaid beneficiaries receive advice on these strategies.

The Issue

Because the rules that allow for asset protection strategies for residents of Medicaid nursing homes are unclear in terms of how they apply to beneficiaries seeking PACE and Waiver services, a significant number of people seeking Medicaid funded LTC services are being, and will continue to be. disincentivized from pursuing PACE and Waiver services until these issues are resolved.  There are two specific areas of concern: (1) Spousal Protections and (2) Divestment.

Spousal Protections

LTC Medicaid policy provides for a so-called “protected spousal amount;” that is an amount of “countable assets” that the so-called “community spouse” (spouse not in the nursing home) gets to keep in addition to the $2,000 that the nursing home resident can keep.  The protected spousal amount is established by looking at the couple’s assets on the “snapshot date” (another term of art) and applying a formula provided by policy.  In PACE and Waiver programs it becomes difficult to establish a snapshot date, and therefore to take steps necessary to exercise strategies available to maximize the protection of assets for the community spouse.  For married couples these protections can be quite generous.  Although Medicaid policy provides a process for establishing a snapshot date in community based programs, most PACE providers and Waiver agents are unfamiliar with the importance of this process and the result is insecurity for the community spouse when pursuing these benefits.


“Divestment” is the policy that penalizes asset transfers for people who give away assets before applying for Medicaid benefits in LTC during the five years prior to applying for benefits (the so-called “lookback period”).  Notwithstanding the policy people do give away assets, either because they do not know the consequences, because they think they should notwithstanding the consequences, or because they have been provided advice on how to do so and preserve assets by using the policy to their advantage.  A key component to fixing inadvertent or ill-advised conduct and for using strategies that allow for transfers notwithstanding divestment policy is the ability to trigger the running of the penalty period of ineligibility that arises as a result of the transfer, and further to provide income to pay for care while the penalty period of ineligibility is running.  Policy for PACE and Waiver services provides no clear direction as to how these two important features of divestment rules apply in this context.  Again, for individuals seeking benefits where divestment is an issue, the lack of ability to fix divestment problems and use the rules to protect assets serves as a disincentive to pursuing these benefits.


These obstacles are fixable if PACE and Waiver providers are willing to work with planners, and apply the rules in a manner that allows families to exercise the same options that are now commonly exercised in the nursing home situation.  Until then, these issues will remain disincentives to those who seek these services.

R.I.P. A/B Trusts (The Day Elder Law Supplanted Estate Planning)

I think it is hard to overstate how dramatic the recent developments in the federal estate tax law are in terms of the practice of estate planning.  It marks the end of tax based planning for the vast majority of Americans, and the end of the traditional model of estate planning practice for a generation (or two) of planners.  The ability of those planners to shift their thinking to the new school of estate planning will be the key to their continued ability to survive and thrive.

The A/B Trust was the bread and butter of those generations of attorneys who made a living as estate planning attorneys, a document that “protected” their clients from the death tax by dividing their assets so that the unified credit of each would be fully exercised.  It included magical division language options, credit shelter trusts, family trusts, marital trusts, even at times QTIP provisions.  In the world where the unified credit amount was only $600,000 and there was no “portability” of un-used credit from the first spouse to die, it served an important function and justified a handsome fee.

But with the ever increasing unified credit amount of the last 10+ years, and certainly with the adoption of the portability of unused credit rules, the age of the A/B Trust is over.  With the permanent adoption of the $5,000,000 (plus COLA) unified credit and permanent adoption of portability rules, there are almost no clients who could benefit from such planning.  For estate planners, this is a historical moment.  For old school estate planners this may be a time of insecurity, reevaluation and reinvention.

As with most changes, this change was anticipated in some corridors. Over the same 10-15 years that old school planners watched and worried about the ever increasing unified credit amount diminishing the ranks of those who could benefit from A/B trust planning, a new school of estate planners was developing.   For those planners who were looking down the road, the shift to the new way to practice began years ago and is well-developed today. For those who have delayed accepting the change, the time for delay is over.

Whether the new school is perceived as elder law or estate planning is somewhat of a red herring.  Early in my tutelage into the profession, my mentor, John Bos, told me that elder law is a subsection of estate planning.  I have since grown to conclude that estate planning is a subsection of elder law.  But the argument is academic.  However you slice it, there is a new way to practice, and fully engaged new school planning firms are bustling.  The work is out there.  The population is aging, wealth is passing, important decisions about complex legal issues are being made and lawyers who know what people want to talk about and what they need to know, are having a hard time keeping up with the demand.

Some years ago, I took an informal poll of estate planning colleagues about whether they considered themselves elder law attorneys.  The majority did not.  They equated the term “elder law” with Medicaid planning and did not feel they were qualified to advise clients on Medicaid planning.  I found this perception misguided. While lawyers may equate elder law with Medicaid planning, the public does not.  And in fact, check with any successful elder law firm and you will find the work is very familiar to the traditional estate planning lawyer: including estate planning and estate settlement.

Here’s the first step: Give up the idea that your value is about saving taxes.  And if you’re still stuck on the idea that “avoiding probate” is enough, move on.  Beneficiary designations are available for about every type of asset, and if all you want to do is avoid probate, they work just as well.  Certainly qualified money is important, and while every planner must make sure their documents address qualified money treatment in a favorable way, planning for qualified money will never replace the estate tax in terms of amount of work it can generate.

Changing your practice means new language, new hot button issues, new documents, and a whole new way of thinking about the role of the lawyer in the aging and planning process. Now, a dose of reality: it doesn’t happen in a year or two. It takes years and hundreds (maybe thousands) of cases to really get it – to be able to spot issues, smell rats and ferret out what is going on and what really needs to be done. 

The new school planner not only has different skills and knowledge, but a different focus.  It is less about numbers and formulas, much more about understanding the aging process and family dynamics.  Government benefits are part of it, but so is dementia, care-giving, caregiver burnout, housing options, family dysfunction, financial exploitation, special needs, and lots of litigation.  In some ways, the new school planners are more touchy feely than the old school authoritative planners who could ponder which funding formula to adopt in a specific situation.  For that reason, I have long perceived that women are inherently better planners in this new age than men.  They tend to connect to those intuitive pieces more easily than do many men – but that doesn’t mean men can’t do it.

Conclusion:  The bell has been rung.  Estate planning primarily focused on tax issues is no longer a sustainable practice model for the vast majority of attorneys.  But the work is there for planners who are willing to change.