Because I knew you were curious, following are the plantobe100 posts that got the most views in 2016. To re-read these posts, just click on the name.
Honorable mention (sixth place) goes to the only touchy feely post to break the top ten. We Do Grow Young Again
Fifth Place was about the Court of Appeals case that looked at what happens when a person deemed incapable of making their own medical decisions revokes their patient advocate designation. Roush II: The Plot Thickens
On the topic of self-settled special needs trusts (aka Medicaid Pay-Back Trusts; aka D4A Trusts), the “Special Needs Trust Fairness Act” has passed both houses of Congress and is headed to the desk of President Obama for his signature. These trusts have long been used to protect the assets of persons who are disabled and under age 65, and who apply for Medicaid and/or Supplemental Security Income. However, the law has been that these trusts must be created by a court, a guardian/conservator, or the parent or grandparent of the disabled trust beneficiary. After this new Act becomes law, in addition to these existing methods, persons who are disabled and competent will be able to create their own trusts. A very important and long sought development in the special needs world.
On the topic of long term care Medicaid benefits, Michigan’s Department of Health and Human Services has amended the rules relating to the treatment of annuities in the context of qualified retirement accounts owned by a Medicaid applicant. Specifically, as of January 1, 2017, new BEM policy (click here) will provide that where the Medicaid applicant has money in retirement accounts (IRA’s, 401k’s, 403B’s, etc.), different rules will apply to the conversion of those accounts to income through the use of a commercial annuity. Specifically, the requirement that such annuities are irrevocable, actuarially sound, and that they make payments in equal monthly amounts; will not apply to annuities created with these types of accounts. Welcome back balloon annuities – I guess. [This positive development was brought about by Chalgian and Tripp’s own David Shaltz, who continues to work under the radar for important reforms that benefit the broader elder law community.]
DAPT – learn it and love it. Soon it will be all the talk. Domestic asset protection trusts. The news is that the Michigan legislature has approved a pair of bills that would make Michigan one of fifteen states with such laws, and of those states, one of the most attractive for persons seeking this type of protection.
In summary, a DAPT allows people to create trusts funded with their own resources, have the resources in those trusts used for their own benefit, and yet have those trust resources unavailable to their own creditors. Nifty trick. A complete reversal of prior law and common law. That is, in states without these laws, and in Michigan historically, a person could not put their own assets in trust and then tell their creditors to take a hike. In the future, they can.
There are limits. One limit is that the conveyance must be done in a manner that is not a fraud on creditors. Specifically, the standard imposed by the new law is that the trust may not be funded with “actual intent to hinder, delay or defraud any creditor.” Another limit is that the interest the settlor reserves is a discretionary or support interest.
Specifically the law defines this relationship as follows:
The potential or actual receipt or use of principal if the potential or actual receipt or use of principal is the result of (i) a trustee’s discretion, (ii) a trustee acting in accordance with a support provision, or a (iii) trustee acting at the direction of a trust protector who is acting in its discretion or in accordance with a support provision.
This sounds so great that the initial reaction is that everyone will want one – and expect the chicken dinner seminar crowd to echo that sentiment. In reality though, these trusts make sense for people who (1) have significant wealth, and (2) have significant risks of creditors. Otherwise, why would anyone put their money in an irrevocable trust and limit their access to those assets to support or discretion?
This will bring trust work to Michigan. Michigan has become a favorable jurisdiction for trust planning, and now, self-settled asset protection trust planning. Michigan laid the groundwork for being a leader in this arena with the exceptional protections afforded beneficiaries of discretionary trusts when it adopted the Michigan Trust Code in 2010. This legislation gives that work a whole new application. Look for wealthy people in other states, both states that do not have these laws, and some states that have these laws but less favorable provisions, to look to Michigan as a place to locate their trusts. To cloak oneself in these protections, it will be necessary to have a Michigan trustee. Good news for the trust departments of Michigan’s banks, as well as Michigan’s estate planners.
Note, don’t confuse this change with self-settled asset protection trusts now used in the context of planning for government benefits – special needs trusts. Those rules are federal and this will not impact those rules.
These laws are a product of the Probate and Estate Planning Section of the State Bar. A committee of that group’s members has been working on this project for years, and deserves great credit for bringing this about. For ICLE partners, a good summary of the law provided was by Rob Tiplady at the May 2015 Probate Institute. I suggest you look up his materials.
This is my first pass at discussing this important development. Expect more down the road. This matters.
The case suggests an issue that I think we all struggle with at times, the extent to which the determination of capacity is a legal or medical matter. While the correct answer is clearly – it’s a legal determination made by the probate judge – as the analysis suggests, the line is fuzzy at best. Courts often rely extensively on medical opinions to make their findings, and the use of medical experts is becoming more and more important in our practices. This opinion only bolsters the proposition that medical opinions carry a lot of weight – especially, where, as in this case, they remain uncontroverted by offsetting medical proofs.
It is worth note that in this case that the COA does not order that the conservatorship be terminated, but only remands the matter and instructs the trial judge to consider a less restrictive arrangement, which could be a limited conservatorship or, although not suggested by the COA, perhaps the execution of a new power of attorney by Mr. Michalak appointing someone other than the petitioner-child.
This case relies heavily on the Bittner decision, discussed in a prior post (click here to read about Bittner) and displays some of the same dynamics – probate judges seeing problems with vulnerable adults and moving to put the matter under their watch so as avoid further mischief – an understandable and somewhat noble sentiment. But the COA here, as in Bittner, pushes back against this inclination; reminding us once again that the balance of dignity and independence against safety and convenience remains the tricky sticky wicket at the heart of our common efforts. For more on my thoughts on “the balance” click here.