Henry Ford Village Refund Policy Upheld by COA

Henry Ford Village is a large senior housing provider in the metro Detroit area. At least some of their residents enter into continuing care contracts that require an up front entrance fee, some or all of which fee can later be refunded in accordance with the terms of the admissions contract.

In the case of Reginald Smith, he paid $152,000 when he entered. When he died, the trustee of his trust and the personal representative of his estate recovered only about $127,000.  The Trustee/P.R. did not dispute that the refund would appropriately be reduced by about $10,000, but did contest the reduction of the other approximately $15,000.  That difference arose because of a provision in the contract that said that the refund would be contingent on the admission of a new replacement resident, and the payment by the new resident of a new entrance fee.  After Mr. Smith died and some time passed during which no new resident was found who was willing to pay the full entrance fee, the Trustee/P.R. entered into a modification of the contract to allow the space to be filled by a new resident who paid a reduced entrance fee – reduced by the disputed $15,000.

The Trustee/P.R. sued Henry Ford Village and various related entities for the $15,000 difference, and lost in the trial court level on summary disposition. The appeal followed from that decision.

In the second paragraph of the COA opinion, the panel notes that: “At oral argument, plaintiff conceded that HFV violated none of the terms of its contract with the decedent or agreement with plaintiff, as those documents are actually written.”

And, for Plaintiff/Appellant, it goes downhill from there. Downhill even to the point of the COA becoming insulting toward the work of Appellant’s legal counsel.  Among other things, the COA characterizes the Appellant’s brief as “exceedingly loquacious and difficult to comprehend.”   Loquacious means wordy.  The COA affirmed the trial court’s dismissal of the lawsuit.

I report on the opinion because it is published (although I don’t know why), and many people who practice in this area of law no doubt intersect with Henry Ford Village and advise clients about continuing care community contracts. If there’s a lesson here (and I’m not sure that there is), I believe the lesson might be that continuing care community contracts are complicated and are likely drafted in a way that favors the financial interests of the people managing the facility.

Click here to read Smith Living Trust and Estate of Reginald Smith v Henry Ford Village, et al.

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Policy Tweaks Scare Medicaid Geeks

When it comes to Medicaid planning, truly the devil is in the details; and the “details” are found in the Michigan Department of Health and Human Services (MDHHS) policy manuals, most often the Bridges Eligibility Manual (the “BEM”). MDHHS has announced several language revisions to a variety of BEM items, all taking effect October 1.  Folks that have been in this game long enough know that such revisions often mean mischief and that, especially during this haunted season, odds are high that there will be more tricks than treats in this bag of goodies.

Waiver Rewrite (BEM 106)

The Medicaid Waiver program (aka “the MI Choice Program”) allows persons qualified for long term care Medicaid benefits to receive services in their homes. Waiver benefits have been around awhile now, but the way the eligibility rules apply to Waiver have remained uncertain.  As of October 1, the Waiver eligibility rules will be much better organized and laid out in much more detail in the new BEM 106.  That’s a treat.

Among the clarifications are the rules for how an initial asset assessment (the “IAA”) is triggered for Waiver applicants, and how a divestment penalty is triggered. These clarifications raise concerns.

The IAA is important because it provides the date which is used for a married person to calculate their protected spousal amount (aka “community spouse resource allowance”). For traditional Medicaid long term care programs, the IAA is triggered when someone enters the hospital or a long term care facility for at least 30 days.  Now, for Waiver applicants, the IAA can also be triggered when the Medicaid applicant has begun:

Receiving appropriate home and community based services specified under the approved state waiver; see Exhibit I in this item. They do not have to receive these services from a waiver agent listed below, but the services must be received from a person or entity certified (or licensed) by the state to provide the services. See below for verification of services received.

So, it seems that a person can now trigger their own Medicaid Waiver IAA date by hiring in-home caregivers (or perhaps it will have to be nurses) that are licensed by the State. That seems to give people, and perhaps planners, more control over the IAA trigger date and may be a treat.  We’ll see.  Cautious optimism here.

Of greater concern in the new BEM 106 is the language that relates to the trigger for the divestment penalty and the way that intersects with the language defining “approved for waiver.” What is says is that the divestment penalty begins “on the date which all criteria listed under the approved for waiver section in this item has been confirmed.”  The “Approved for Waiver” section provides the following:

Approved for the waiver means:

  • The agent conducted the assessment, and
  • There is an available wavier slot for the individual’s placement and
  • A person-centered plan of service has been developed and
  • The participant received, or expects to receive, supports coordination services from the agent with appropriate waiver services for at least 30 consecutive days.

The agent determines the waiver approval date and termination date. The agent is responsible for advising the appropriate local Michigan Department of Health and Human Services (MDHHS) office of these dates. The agent is responsible for advising the appropriate local MDHHS office the dates of enrollment and disenrollment information in CHAMPS.

This seems to leave all control in the hands of the Waiver Agent, and will also depend on slot availability. This will make divestment planning strategies for Waiver clients much less predictable.  Definitely room for mischief here. Call this a trick.

Assets (BEM 400)

As of October 1, the language in BEM 400 that allows real estate to be considered unavailable during periods in which the property is listed for sale has been tweaked in three respects.

First, the policy has been modified by the addition of the following sentence: “If after a length of time has passed without a sale, the sale price may need to be evaluated against the definition of fair market value.”

Second, it now says “The asset becomes countable when a reasonable offer is received.”

Third, the non-salable exemption will not be applied to the initial asset assessment (IAA).

While none of these changes seem particularly egregious, one always wonders why DHHS would go through the trouble to include them if there isn’t some hidden agenda. But then maybe I’ve become too cynical.

The October 1 changes to BEM 400 also include beefed up language to clarify that assets remains an available resources during periods in which the applicant is waiting for a conservator (or guardian) to be appointed. So even though you may have no power of attorney or other legal ability to spend down or otherwise qualify for Medicaid, the fact that the assets exist is all that matters.  The cost of the delay of obtaining court authority falls on the applicant.  That has always been the rule. So, again, one is curious about the need for these clarifications.

Divestment (BEM 405)

BEM 405 now includes an eerily vague and portentous provision that says: “purchasing an asset which decreases the group’s net worth and is not in the group’s financial interest” is a transfer of assets, and apparently also per se “divestment.” Definitely an invitation to mischief and definitely a trick.

Divestment policy will now define “putting assets or income into a Limited Liability Company (LLC)” as a transfer of assets which presumably means it can be analyzed as possible divestment. A trick.

BEM 405 policy has been clarified to address situations where past divestment activity is subsequently discovered and reported. The new language provides that the penalty period starts on the “first day after timely notice is given.”  Maybe not a treat, but I’m ok with this.

Conclusion

There are other tweaks to the aforementioned BEMs and tweaks to other BEMs not discussed above, but these seem to me the most curious. To read the entire bulletin with links to the policy, click here.  Happy Halloween.

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Divestment Rules for Medicaid Waiver Clarified – Maybe

A policy bulletin has been issued by the Michigan Department of Health and Human Services which provides additional direction on when and how a divestment penalty period runs for persons otherwise eligible of Medicaid Home and Community Based Waiver services (aka the ”MIChoice” program).

Click here to read the policy bulletin, which takes effect October 1, 2018.

The point of the policy seems to be that under federal law there was uncertainty about how to start a divestment penalty period running for persons in waiver programs, like MIChoice. The source of this clarification is a federal directive to state Medicaid directors that explains why there is perceived confusion about this issue.  In fact, I think the federal letter does a better job of explaining the issue than the State Policy Bulletin.  Click here to read that letter.

In any event, the powers that be have decided that the penalty period begins to run when the person applying for MIChoice services is deemed otherwise eligible for the program, which is a four part test:

  • determined that the applicant meets financial and non-financial requirements for Medicaid;
  • determined that the applicant meets the level of care criteria for the 1915(c) waivers;
  • determined that the applicant has an individual person-centered service plan in place; and
  • confirmed there is an available waiver slot for the applicant’s placement.

Well, BEM 405, page 14, already says:

The penalty period starts on the date which the individual is eligible for Medicaid and would otherwise be receiving institutional level care (LTC, MIChoice waiver, or home help or home health services), and is not already part of a penalty period.

As far as I can tell, this current Michigan policy seems to be in line with the new proposed policy. It certainly seems consistent with the federal directive, which simply says:

the penalty period start date for a 217 applicant is no later than the point at which a 217 applicant would otherwise be receiving HCBS waiver coverage based on an approved application for such care but for a penalty

If you want to worry about something, you might look to the State’s decision to include the requirement that there be an open slot to start the penalty running. That might prove challenging for planners in the future.

So, in the end, I’m not sure how things change with this new policy, or if they really do. Nonetheless BEM 405 will presumably be rewritten to conform with the bulletin and those who practice in this area may run into snags, or avoid snags, as a result.

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Medicaid Planners Get Rare Win from COA

The Michigan Court of Appeals has issued an opinion regarding the appropriateness of using probate court protective orders to obtain spousal support orders in situations where such orders impact the calculation of a nursing home resident’s Medicaid “patient pay amount.” The outcome is 80% good for planners, and as such is a refreshing break from the series of punishing COA opinions that have been issued in recent years with respect to Medicaid planning cases.

The case is published, lengthy and involved. Click here to read the combined cases of In Re Joseph VanSach Jr., and In Re Jerome R. Bockes.

For the uninitiated, a “patient pay amount” is the portion of a person’s income that is required to be paid to toward their care when they are in a nursing home receiving long term care Medicaid benefits. The exact amount is a function of Michigan Department of Health and Human Services (DHHS) policy, which provides a formula for calculating the patient pay amount.  When the nursing home Medicaid beneficiary is married, that formula allows for diversion of income to the “community spouse.” DHHS policy also provides that where a court order directs payment from the nursing home resident to the community spouse, that court order supersedes the formula for determining the amount of income diverted.

In both of the cases before the COA, the local probate court ordered that 100% of the income of the nursing home resident would be paid to the community spouse for their support. These two decisions were appealed by DHHS, represented by the Michigan Attorney General, and the two cases were combined by the Court of Appeals.

The main argument of DHHS was that the probate court lacked jurisdiction to hear these cases. That argument was made on several grounds, all of which failed.  In this decision, the COA holds that probate courts have the authority to grant these orders and that in doing so those courts are not engaged in making DHHS eligibility determinations even though the clear purpose of obtaining such orders may be for that reason.  That’s a big win for the planners.

The COA also holds that the fact that these individuals may have had power of attorneys in place at the time of the petition does not preclude the probate court from getting involved. The COA reasons that the specific form of relief desired (a court order of support) would not be something that an agent acting under a POA could provide, and therefore the court does have jurisdiction to hear these matters.  This holding has potential applications beyond Medicaid planning matters.

After dismissing the primary jurisdictional challenge, the COA ventures into a discussion about how a probate court should decide these cases. The COA holds that in the two cases giving rise to the appeal, the probate courts erred in awarding 100% of the nursing home resident’s income to the community spouse, and vacates both orders and remands the cases.

The COA instructs Michigan’s probate courts that the burden is on the party seeking the order of support to show, by clear and convincing evidence, that the community spouse “needs” the additional income, that it is more than a “want,” and that in deciding whether or how much to award, the probate judge must consider the interests of the institutionalized Medicaid beneficiary and their obligation to contribute toward the costs of their own care. The discussion of this process goes on for several paragraphs, and includes several lengthy footnotes, using, at times, vague and clouded statements to explain how this balance should be struck.  In the end, the opinion seems to intentionally avoid the obvious conclusion that the institutionalized spouse has no real interest in paying anything more than they have to toward their care, as their care remains the same notwithstanding, and that in almost every case the interest of institutionalized spouse would be to divert as much income to support their spouse as possible.  The COA seems to want to direct the probate judge to consider public policy and the interest of the DHHS in making its decision – but they never say that – presumably because there would be not legal basis for doing so.

Importantly, the COA rejects the standard requested by DHHS of “exceptional circumstances resulting in significant financial duress.” But in the same footnote discussion, the COA goes on to say:

… as a matter of common sense, when an incapacitated person needs to be institutionalized to receive full-time medical care, it would be an unusual case for a community spouse’s circumstances to trump the institutionalized spouse’s need for use of his income to pay his medical expenses, particularly when the community spouse has the benefit of the CSMIA. In other words, an institutionalized spouse’s receipt of Medicaid, and a community spouse’s protection under the spousal impoverishment provisions, generally weighs against the entry of a support order.

The result of this case will require more effort in bringing these matters to probate courts in the future. Practitioners will want to establish a record that the probate judge can rely upon to conclude that the burden has been met.  As evidenced by the orders vacated in this appeal, a judge simply concluding that the request was “reasonable” is not good enough.

We should also recognize that while this case is about protective orders used to establish income diversion orders to benefit the community spouse, many of the same rules and standards would presumably apply to the other common use of protective orders in Medicaid planning: orders to establish a protected spousal amount.

In the end, these important planning tools (probate court protective orders) survived the COA and planners should celebrate this decision. It isn’t perfect, but in light of the COA’s prior decisions in this arena, it’s a lot more than might have been expected.

Representing the interests of the elder law bar (as appellees) in these two matters were two renowned elder law practitioners: CT’s own David Shaltz, and my friend and colleague Don Rosenberg.

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The Imperfect Bandage of Undue Influence

A rant this morning. Something to think about over your Sunday morning coffee (or tea).

Our firm starts lawsuits involving vulnerable adult exploitation as much as anyone I suppose. And we almost always plead two things: incapacity and undue influence.  While in some cases the evidence may support the proposition that the person really was so cognitively impaired that they didn’t know what they were doing, most often that is not the case.  Most often we plead incapacity in order to introduce the idea that this person’s capacity was impaired to the point that it reduced the level of persuasion that would be necessary to overcome their volition = undue influence.

For those who practice in this area, they know how difficult it is to win a case on undue influence. You have to show that the victim was essentially a conduit through which the bad actor achieved their objective – that the free will of the victim was completely overwhelmed by the power of the undue influencer.  The so-called “presumption of undue influence” can be a help, but most court cases hold that the presumption, even where it is established, can be rebutted with nominal evidence.  In any event, the presumption is not the topic today.

My point (or argument) today is that we rely on undue influence because we don’t have anything better. We don’t have law that reflects the reality of the aging process today.

I have discussed the research of Dr. Lichtenberg before (see Peter’s Principles and Our Evolving Understanding of Exploitation). His work, and the experience of those of us who handle these cases, informs us that older people can be exploited because of circumstances that have nothing to do with cognitive impairment – that exploitation can occur simply because an older person loses their sense of control, dignity and/or empowerment.

These cases don’t fit well into any current legal theory. But the best we have is undue influence. Other legal theories like unconscionability, mistake, fraud  and constructive trust are available, but like undue influence, these theories are imperfect for our purposes.

The most promising development is the concept of a “vulnerable adult,” which recently entered the legal lexicon. It now appears in the criminal code and in policy for adult protective services workers.  But it has yet to find its place in the civil and probate world. Perhaps the concept of vulnerable adult exploitation will lead to new civil theories and remedies.  But we have to be mindful of what that would mean.

If we move the goalpost, as it were, from incapacity to vulnerable adult, are we going too far? There are good reasons that incapacity has served as the bright line for (1) court jurisdiction to invade the rights of an individual through a guardianship or conservatorship, and (2) as grounds for setting aside estate planning documents, deeds, beneficiary designations and contracts entered into by adults who are presumed to have the ability to understand what they are giving up and what they are getting in return.  Is it a good idea to reduce the proofs necessary for either or both of these outcomes?

Societal changes triggered by modern medicine and the resulting explosion of people living to an advanced age have come upon us quickly. The law evolves slowly, but evolve it must.  Elder law attorneys and probate litigators are struggling to find legal theories to adequately address the civil injuries impacting our clients and their family members.  Undue influence is an imperfect bandage, but for now, it’s the best we’ve got.

 

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Storm Clouds in Elder Law Land

It seems to me that we are living through what could be a case study on the way the law evolves to address a rapidly changing social environment. More people are living longer.  More people are experiencing age-related cognitive impairments.  At the same time family dysfunction seems to be the rule, not the exception.

As a result, the law in the arena of adult guardianships and conservatorships is experiencing stress and litigants are experiencing a high degree of instability with respect to the process and outcomes in the trial courts. Trial courts hardly know what to do with these cases. They need clearer direction.  The issues that are coming up are difficult and deeply personal, factually unique in each case.  The laws only offer general guidelines about how to resolve these conflicts.  It is time for our appellate courts to figure out how these laws can best be construed to provide just results notwithstanding the complex issues, and to make practical compromises to allow the system to work in larger counties. More laws, I think, are not the answer.

My thoughts on this topic were triggered by a recent unpublished opinion, In re Conservatorship of Janet Kapp (click on the name to read the case). The case itself is insignificant, but offers a good example of the issues that commonly arise in these matters – both in terms of the facts that are coming into court, and the legal challenges that trial courts are struggling to address.  But the problem has been festering for some time.  In fact, I wrote an article for the State Bar Journal several years ago on the topic: Adult Guardianships, the New Divorce (click on the name to read the article).  It was evident then that we were facing a storm, now it seems the storm has arrived.

The issues include:

What does a Court have to do before passing over a family member with priority and appointing a professional fiduciary?

What role does family dysfunction play in this decision? Is it good enough for the trial judge to say: “You all can’t get along, so I’m appointing someone from outside the family”?

What role does alienation of affection play? Where a family member keeps other family members away, is that per se a basis for passing over that family member, or must a court look into whether that decision is rationally based? [On this point it is interesting that legislation is being proposed to create a process to address family visitation rights for vulnerable adults.  Click here to read that proposed legislation.  I personally see this effort as well-meaning but misguided.  We don’t need more laws, and the process proposed by the legislation is, to my mind, unworkable.  Trial courts have this power now (click here to see blog post Seeing Redd, for instance).]

What role do existing estate planning documents play? In this new Kapp case we see the trial court simply blowing past the existing documents, based on a Guardian ad Litem’s conclusion that the older adults were probably impaired when they were signed.  Is that ok?

How much discretion do trial courts have in this context to avoid holding an evidentiary hearing?

In numerous unpublished opinions, the Court of Appeals has been all over the board on all of these issues. As for published opinions, in the last three years alone we have seen wild fluctuations from, for instance, the Bittner case (click here to read Bittner’s Bite) to the rather incredible legal conclusions reached in Brody (click here to read Another Brody Bombshell).  Trial courts need guidance, but we need to appreciate this guidance has to allow for practical implementation – a workable system.  It is one thing for an experienced and engaged trial judge in a small county to hold a two day (or more) trial on the issue of suitability, and another thing to tell larger counties with busy dockets and a high percentage of pro per litigants to do the same.

Some help may be coming. The Michigan Supreme Court has agreed to take up Brody, and the Probate Section of the State Bar has been approved to file an Amicus Brief (proud to say that Chalgian and Tripp has been retained by the Section to prepare that brief).  But I wouldn’t expect too much.  While this case opens the door to the MSC to address many of these issues, they are likely to offer only some direction on the narrow issues in the appeal.

Finally, there’s an old saying: “May you live in interesting times,” and I’ve always felt that one of the things I enjoy about my chosen practice area is that it’s changing so rapidly, and the law is struggling to keep up – which makes for interesting times indeed for those of us who work with aging issues and vulnerable adult exploitation in particular. But when I looked up the saying on Wikipedia, I found this explanation of the saying, which suggests I may want to temper my enthusiasm:

“May you live in interesting times” is an English expression purported to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is always normally used ironically, with the clear implication that ‘uninteresting times’ of peace and tranquillity are more life-enhancing than interesting ones, which from historical perspective usually include disorder and conflict.

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POST Set to Join Michigan’s Medical Directive Stew

When it comes to medical care advance directives, we Michiganders have patient advocate designations, advance directives, and do not resuscitate orders. Soon, it appears, we will also have POST forms.  Laws requiring the development of, and allowing for the use of, POST (or Physician’s Order for Scope of Treatment) forms in Michigan have now been passed by both houses and are awaiting the anticipated signature of Governor Snyder.  UPDATE:  The Governor has approved these bills.  The law has an effective date of February 6, 2018.

A POST form is a document that would be signed by a patient and their doctor which would provide direction for the treatment of a specific condition, which direction could include end-of-life choices. The expressions in the form would continue to have effect even if the patient subsequently becomes unable to make their own medical decisions.

A POST form differs significantly from a patient advocate designation or advance directive in that a person may not unilaterally create them. They are created by the patient in consultation with their medical care provider.

Waiting for It. Once these new bills are signed into law, State agencies will initiate a process to develop a standardized form. The use of POST forms will be delayed until that process is complete.  This process could take years.

Let’s look at the soon-to-be new law:

  • A guardian and a patient advocate will have authority to create a POST form for a person who is unable to make their own healthcare choices.
  • A POST form remains revocable by the patient or their representative (PAD or Guardian). A patient may revoke a POST form orally or in writing.
  • If a patient has a pre-existing patient advocate designation that includes an advance directive regarding end-of-life care that is inconsistent with the expression in a POST form, the POST form will take precedence, being treated as a more current expression. Likewise, to the extent inconsistent, a POST form would trump a previously executed do-not-resuscitate order.
  • A POST form expires in one year from the date of creation, or sooner if there is an “unexpected change” in the patient’s medical condition, if the patient moves to a new facility or to a new care level, and if the patient gets a new attending health professional. They may be continued beyond one year upon agreement of the patient or their representative (PAD or Guardian) and the attending medical provider.
  • POST forms would be controlling in institutional care settings, including adult foster care homes; and in the case of an EMS event, outside of institutional care.
  • The probate court has jurisdiction to determine the validity of a POST form. The basis for challenging a POST form would be that the POST form expressions are contrary to the patient’s wishes or best interests.

To read the law, you will want to look at the four House Bills that make up the package of legislation. Most of the law is in House Bill 4070.  Additional changes are in House Bills 4171, 4173 and 4174.  Click on the numbers to read the bills.  What you will see is that the law is mainly in the public health code, with a few conforming changes to EPIC and the Adult Foster Care Licensing Act.

POST forms have been used in some parts of Michigan (without legal authority) for many years. For the record, Jackson County seems to have been the first to implement their usage some 15 years ago.  Other counties have used them for the past few years as part of a pilot program.

POST forms, sometimes referred to as POLST forms (Physician’s Order of Life Sustaining Treatment), are currently in use in several other states. For a good discussion of POST/POLST forms, go to the National POLST Paradigm website by clicking on the name.

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Ramblings on Race and Retirement Michigan-Style

I recently settled a case in Traverse City. The case was pretty involved and I spent a lot of time up there this summer.  As most of you probably appreciate, Traverse City is a retirement community, so most of the people there were my age or older – and dang near all of them were white. Made me think about how people retire in Michigan.

The way I figure it, Petoskey and Harbor Springs are the conservative (Republican) retirement enclaves (some BIG money up there). Traverse City seems more pedestrian, people with some money, but most of them living on pensions, retired educators, higher-ups in State government, that sort of thing.  More Democrats I would assume.

What was interesting to me is that these old NPR-types had created for themselves this world that features the indicia of urban hipsters – a very nice famer’s market, art and film festivals, even a so-called warehouse district – but which completely lacks racial diversity.

A little on-line research backed up my perceptions. According to the U.S. Census Bureau, Grand Traverse County is 1.2% black and 2.8% Hispanic.  Wow! So I wondered, how would the good people of Traverse City would explain their situation?  I came up with a couple possible responses:

  1. It’s not our fault that minorities don’t earn enough to retire to nice places like we do. We wish they did.
  2. Despite our sympathies/rhetoric, we want our retirement to be in a “safe” place -with that “safe” word carrying with it all the stereotypes and assumptions that plague our broader society.

And maybe it’s both. Or maybe they don’t really care and just want to be in a happy place with a population of fellow retirees who can support a lot of fancy restaurants, yoga studios, and golf courses.

And then my thinking turned to the more practical issue involved in having so many old people in one place: Who does all the dirty work?

When people move to a retirement community, especially one that is some distance from their homes, they sort of waive the right to impose on their children (especially female offspring) to take care of their needs as they age.

Turns out, this may be the fly in the ointment. At an event in Ann Arbor, I ran into a person who runs a homecare agency in Midland.  We talked about his business and my perceptions of Traverse City.  He told me he would love to expand into Traverse City, but there aren’t enough people up there who want jobs caring for the aged.  In other words, not enough low income workers.

I think it’s safe to assume that as those 60-75 year-olds who currently populate Traverse City move into their 80’s and 90’s, they are going to need help; help getting around, help keeping their meds straight, and help eating and toileting themselves. So then what?  They move back to urban areas? Or the long term care industry, and the racially diverse low-wage workers that go with it, move north?  It will be interesting to see.

These are just my ramblings. I have nothing against Traverse City or how the folks in that area choose to live.  I just thought it was interesting.

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Another Brody Bombshell

UPDATE:  This decision was subsequently revised.  Some of the problematic aspects of the COA opinion were corrected.  See Better Than Nothing? for details.

 

This is a published Court of Appeals opinion involving the appointment of a conservator over an adult under EPIC. Click here to read In Re Conservatorship of Rhea Brody.

This case comes out of same family that was involved in the In Re Rhea Brody Living Trust, which case is the topic of the post earlier this month. That prior case dealt with the Rhea Brody Trust, and offered the surprising revelation that a contingent beneficiary of a Trust could contest the actions of the Trustee even while the trust remained revocable.  Click here to read that post.  This second Brody case deals with the appointment of a conservator for Ms. Brody.

The litigants in the case are aligned similarly. In the Trust matter, husband and son were aligned in defending the removal of husband as Trustee, which arose as a result of favorable business dealings between the husband as trustee and the son; which dealings were perceived as being done to the detriment of the daughter, a contingent beneficiary.  In this case, husband and son oppose appointment of a conservator, which appointment is supported by daughter.  The court appointed an attorney who was also acting as Trustee of Rhea’s Trust to serve as her conservator.  The COA affirms.

The husband, as appellant, contests pretty much every aspect of the trial court’s decision, except the finding that Rhea was incompetent. The conclusions of the COA are intriguing.  Look for this case to be cited often by litigators seeking to impose conservators and desiring to by-pass priorities of appointment.  To some extent, perhaps a large extent, this case is the counter balance to In Re Bittner, a relatively recent published opinion addressed in the post “Bittner’s Bite” (click on name to read that post).  In Bittner, the COA chastised a trial judge for imposing a conservator where the requirements of EPIC were not met.  Here, the COA goes to great lengths to justify the appointment over seemingly problematic facts.

One issue relates to whether the evidence supported the finding that appointment of a conservator was necessary to provide for management of assets and avoid waste. In this case the evidence is that husband was agent under a valid POA for Rhea, and further, that all of her assets (except one IRA) were joint with husband.  Further, husband alleges that the IRA was set up to make minimum required distributions annually.  The basis for finding necessity appears to be the conclusion that husband wasn’t really managing these matters, but rather that he had “abdicated” his role to the son, and that son was a potentially devious manipulator of the situation.  The COA goes so far as to suggest that the appointment of a conservator was necessary so that someone independent could review the tax returns.

Which leads to another conclusion of law by the COA in this matter: that the appointment of a conservator does not require a finding that there has been waste of assets, only that such waste could occur in the future. So reasonably founded speculation is enough.

Additionally, and perhaps most concerning, are the findings of the COA with respect to the priority of appointment. The COA cites MCL 700.5409(1)(a)  for the proposition that an independent fiduciary has priority over a spouse and agent under a POA where the POA nominates the agent as conservator. MCL 700.5409(1)(a) says:

(1) The court may appoint an individual, a corporation authorized to exercise fiduciary powers, or a professional conservator described in section 5106 to serve as conservator of a protected individual’s estate. The following are entitled to consideration for appointment in the following order of priority:

(a) A conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides.

I have always understood this section to mean that a conservator previously appointed by another court would have priority. In this case, the COA seems to say that a professional fiduciary appointed as Trustee over the ward’s Trust by this same Court meets that definition.  The COA states:

Under MCL 700.5409, a protected individual’s spouse is entitled to consideration for appointment as conservator, and is granted priority over all other individuals except “[a] conservator, guardian of property, or similar fiduciary appointed or recognized by the appropriate court of another jurisdiction in which the protected individual resides,” MCL 700.5409(1)(a), and “[a]n individual or corporation nominated by the protected individual if he or she is 14 years of age or older and of sufficient mental capacity to make an intelligent choice, including a nomination made in a durable power of attorney,” MCL 700.5409(1)(b). As Rhea’s husband, Robert was an individual entitled to priority consideration. However, Robert was not entitled to consideration unless the probate court considered an independent fiduciary and found him or her unsuitable. Lyneis, as trustee and independent fiduciary, had statutory priority over Robert, despite Robert’s marriage to Rhea. MCL 700.5409(1).

Wait – WHAT? Where is the other jurisdiction?

Further, and maybe even more unsettling, the COA says:

The statute’s priority classifications are merely a guide for the probate court’s exercise of discretion.

Really?  This statement seems to fly in the face of a long line of cases that require a finding of unsuitability – including, perhaps ironically, the case of In re Guardianship of Dorothy Redd, which is the topic of the other post I wrote today, a case issued by a separate panel of the COA on the same date as this matter.

That said, the COA goes on to say that the husband is unsuitable, again, because the son is a manipulative fellow and may use his influence over husband to Rhea’s detriment in the future.

There are other issues addressed in this case, but I think I’ve hit the ones that seem most significant, and that are those most likely to be cited by litigators in the future.

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Seeing Redd

Here’s another important published opinion on the topic of adult guardianships. The case is about the removal of a guardian of an adult ward appointed under EPIC.

The case deals with the very common, and therefore very important, situation in which a guardian is using its position to undermine healthy family relations. In this case, the facts relied upon by the trial court and the COA are that the existing guardian was actively interfering with visitations, and taking steps to cause the ward to be distrustful of other family members.  These alienation cases go on all the time.  It is helpful to have an opinion that clarifies that such behavior is a basis for removal of a fiduciary.  It is likely that this case will be cited frequently where such facts arise, and I suspect that the finding that such behavior disqualifies a guardian will be offered by extension to cases involving conservators and other fiduciaries.  And that’s good.  We need this law.

So basically the trial court removed a guardian for the reason that he was undermining family relations, and the COA affirms. Click here to read In re Guardianship of Dorothy Redd.

In reaching its decision, the COA holds that the standard for removal is “suitable and willing to serve.” This finding is an important clarification of MCL 700.5310 which is silent on the requirement for removal.

The COA also finds that the standard of proof for removing a guardian for unsuitability is not clear and convincing evidence, but rather a preponderance. Interestingly, in reaching this conclusion the COA indicates that the standard for proving unsuitability in the initial appointment hearing is clear and convincing evidence.  This reading of the priorities in a guardianship proceedings seems inconsistent with the conclusions regarding priorities and unsuitability reached by a separate panel discussing these issues in the context of a conservatorship, as addressed in my other post of today’s date regarding In Re Conservatorship of Rhea Brody.

So, it’s a big day in the world of litigating guardianships and conservatorships. These two published cases (Brody II and Redd) will be cited in the future, each for their own important conclusions of law.  Probate litigation in the age of living to be 100, where the fun never ends.

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