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American Austerity

The boomers are aging in huge numbers.  The ratio between working-age tax payers and retirees is slanting rapidly toward the retirees. The government programs that provide care for the aged are already unsustainable.

The seemingly obvious result of this reality is that boomers can expect significantly less government support than the current generation of elders.  As boomers look at the institutions into which they place their 80+ years-old parents with distaste and, at times, disgust, I wonder what they think will be waiting for them.

Reality check: Today’s care options may well seem luxurious in comparison to what the boomers can expect in another decade or two.

What’s more, the elders of today were savers and have had some resources of their own to supplement what the government provides.  That is not the case for most boomers, who have lived beyond their means, and relied largely on credit to enjoy a lifestyle they never could afford.  Many have almost no savings, some are in debt.  In large part, boomers enter these fragile years relying almost exclusively on what the government will provide.

One might see an ironic twist in the situation: The typical 80+ year-old lived a modest life, took few vacations, eating out was a treat.  One might say they embraced austerity and were comfortable with it.

I recall my mother telling me about getting an orange in her Christmas stocking and thinking that was wonderful.   How quaint that seems, but how remarkable when we compare that to the world the boomers know.

Boomers travel the world, stay in luxurious resorts, eat out often, toss out leftovers, and lavish themselves and those around them with holiday gifts – gifts they often don’t need and never use.  Now they enter their fragile years with the prospect of having austerity forced upon them.

First Generation

When thinking about the law and aging, it is important to appreciate that we are the first generation to deal with this issue.

A generation ago people did not regularly live to be 90 or 100 years-old, and because cognitive impairments are so closely correlated to advanced age, the societal challenges created as a result of the dementing illnesses were not nearly so significant in the past. Yes, some people became old and “senile” but those instances were relatively rare and taken care of within families or institutional care settings.

As a result, we were not educated and have no role models to help us deal with being the children of aging parents who experience these conditions.

As an attorney practicing in this arena, I find myself facing adult children practically every day who have no idea where to begin. They don’t know the difference between a guardianship and a power of attorney, between Medicaid and Medicare, or between assisted living facilities and nursing homes.  What typically happens is an event that triggers the need to learn– the family gathers for Thanksgiving dinner and realizes just how bad Dad’s memory has become, or Mom has a fall and ends up in the hospital, then they find themselves sitting with a hospital discharge planner who tells them that Mom can’t go home. They come into the meeting with me with a “deer in the headlights” look.

Perhaps things will be different in the future.  Common sense would suggest that we begin talking to our children about aging in kindergarten.  But in this youth oriented society (topic for another day), that’s not likely to happen.  In the meantime, our generation is learning on a need to know basis.

Guardianship Law Change

There was a big change in guardianship law – or was there?

Public Act 173 took effect October 1, 2012 (and can be found on our website’s professional resources page).  It is a big bill, modifying 8 statutes.  It purports to be a major revision of guardianship and conservatorship law in Michigan, and while the bill clearly matters to those of us involved in these proceedings, the extent to which this law changes the dynamics of a guardianship proceeding won’t be known until the new forms come out.

I was a member of the State Court Administrator’s Office Probate Forms Committee for years. The work of this committee (which I understand has now been broken down into several work groups), is important although at times tedious beyond belief.  It is charged with taking the changes in the law and modifying the forms that are required to be used in court filings to reflect those changes.

This new law requires several things:

•  It puts more work on the guardian ad litem (the “GAL”) (the person appointed by the court to investigate the petition for guardianship and to provide a report to the court of its findings before the hearing).  The new law expands the information that the GAL is to provide the subject of the petition (the would-be ward).  In cases where there is not also a petition for conservatorship pending, the GAL is required to estimate the value of the ward’s estate so that the Court can decide if a conservatorship would be beneficial.

•  The guardian, if appointed, is obligated under the new law to tell the court is the assets in the estate of the ward are significantly more than what the GAL estimated.

•  Bonds are required in all conservatorships, without exception, where the liquid assets exceed the small estates ceiling, currently $21,000.

•  The powers of the guardian must be enumerated by court order.  That is, the court must decide which powers it grants to each guardian.

Take aways:

Conservatorships will become more difficult for families to handle themselves.  The bond requirement will be too expensive for many estates, and a good number of lay people seeking to serve as conservators will have something in their past that will preclude them from being bondable.  Some relief from this requirement might be achieved by using restricted accounts, and only requiring bonding as to those amounts that remain unrestricted.  It will be interesting to see if Courts are willing to dance this lightly around the new statute’s requirements.

The requirement that the Court must enumerate the powers of the guardian is the trickiest issue.  If attorneys preparing orders of guardianship are required to anticipate and justify every power that the guardian might exercise, they will be hard-pressed to do so without assistance from the forms committee – such as a box on the form that elects “all powers granted by law.”

In the end, this bill has the potential to increase the need for public guardians and conservators, a result which I suspect was not intended by the bill’s proponents.  The SCAO forms committee will have its work cut out for it as it decides how to deal with this law, so as to not create an unworkable process.  Good luck to them.

Capacity to Marry

Here’s an interesting published Court of Appeals decision that many probate practitioners may have missed, because it came out of a circuit court, but which has significant implications in the arena of financial exploitation of vulnerable adults.

In Estate of Ellen S. Mullin v Rene Marco Duenas, the Court of Appeals looked at an action of annulment of a death bed marriage, brought by the children of the decedent after the death their mother.  It provides a roadmap of how to handle these matters.

Plaintiffs in this action are the children of Ellen Mullin (acting as personal representatives of Ellen’s estate).  Ellen died of cancer, and in her death bed she wed defendant, Duenas.

Supporting the Plaintiff’s case is that Ellen was heavily medicated in her last days, and often confused and disoriented.  Fatal to their case was the fact that the doctors treating Ellen in those final days said that at a time nearly contemporaneous with the marriage, she was alert and oriented; and also that Ellen and Duenas had a long-standing intimate relationship and had lived together (on and off) for several years.

The Plaintiffs asserted two issues: lack of capacity and fraud.

The Court of Appeals found that the personal representatives had standing to challenge the validity of the marriage based on capacity, but that their burden of proof was “clear and positive proof that the marriage was not valid” – a burden they were unable to sustain.

The Court of Appeals found that, although fraud is a basis for an annulment, fraud can only be asserted while the party to the marriage is living.  Accordingly the personal representatives lacked standing.

In my practice I am finding annulment to be an increasingly important cause of action, as marriage becomes a more common tool of financial exploitation of vulnerable adults.  I think what we take away from this case is that these cases are difficult, especially if the married person our client represents is dead.  The burden of proof is high.  But we also can see that in the right situations, these cases have legs and should be considered.

Rebutting Presumption of Undue Influence

It’s over – at least for now.  The Mortimore case.

This is a case I have spoken and written about quite a bit for the past year.

Common facts: Older gentleman.  His wife of many years dies.  New woman becomes involved. Alienates family.  He dies.  She produces a will (surprise) leaving everything to her.

At the trial level, which I did not handle, a will contest takes place.  Trial court rules in favor of the woman (and against the kids).  Trial court says: I don’t know what to make of this, two very different stories. I am upholding the will.

I am retained to handle the appeal.  We raise the issue that the trial court failed to consider the presumption of undue influence that arises when a person (1) has a fiduciary/confidential relationship with the decedent, (2) the opportunity to influence the decedent, and (3) benefits from the document thereby created.

The Court of Appeals not only agrees, but reverses the decision of the trial court and throws out the will.  They say: had the trial court considered the presumption, they would have found the presumption applied, AND that the Appellee failed to rebut the presumption.  Nice Result!!

But, not the go down easy, woman hires counsel to request the Michigan Supreme Court review the Court of Appeals decision.  They agree the presumption applies, but they argue that the Court of Appeals failed to apply the proper standard for rebutting the presumption.

The Michigan Supreme Court accepts the case, briefs are filed, and oral arguments are held.  At the Supreme Court hearing, I am grilled by the Chief Justice who is clearly convinced that the Court of Appeals erred – specifically, that the standard that the Court of Appeals used to rebut the presumption (preponderance of evidence) is too high.  The thinking is that if the standard to rebut the presumption is a preponderance, the result, in effect, is that by establishing the presumption the burden of the entire cases is shifted to the party defending the document.

The truth is that Michigan Court of Appeals cases are all over the board on this.  The last pronouncement by the Michigan Supreme Court on this point was more than 30 years ago in Kar v Hogan, 399 Mich 529, 542; 251 NW2d 77 (1976).

The options are anywhere from a scintilla of evidence to a preponderance, with most cases coming down somewhere in between.

In light of my treatment at oral arguments, I was not hopeful about my prospects.  So, wasn’t I surprised when we received an order from the Michigan Supreme Court vacating the original order accepting the case.  In other words, they changed their minds and decided (after hearing oral arguments) that they never should have taken the case in the first place. That means they left the Court of Appeals decision in place.  Whew….

The Chief Justice wrote on lengthy dissent which offers one perspective on this issue.

The truth is that this is an important issue, and we don’t have clear law.  The problem is that if, as argued by the Chief Justice, the presumption of undue influence is given as much respect as are presumptions in other areas of the law (which is very little respect), the role of the presumption in protecting vulnerable adults will be diminished, and depending on the new standard adopted, perhaps dramatically so.
Request for reconsideration to the Michigan Supreme Court was denied, so, for now, the case is back in the trial court with the will thrown out.  There are other interesting issues in this case, which could lead us back into the appellate courts again, but the Supreme Court walked away from this opportunity to address is important and complicated issue.

Proposed Medicaid Policy Change Released

The State has issued proposed policy changes to the Medicaid program, which, if adopted, would be effective October 1, 2102.  To review the proposed policy click here:  Proposed Medicaid Policy.

In terms of advising elderly clients seeking long term care Medicaid benefits, the interesting provisions of this proposed policy are:

1)      Married couples are allowed one year to transfer assets from the nursing home resident (Medicaid applicant) spouse to the community spouse (the so-called “presumed asset eligible period”).  If the new policy is adopted, BEM 402, page 4, will provide that at the end of that year, the Medicaid caseworker is to review each asset that was owned by the couple on the “snapshot date” date and determine if any divestment has occurred during this first year.  Planners need to advise their clients to be mindful of this review, and for the community spouse not to make gifts during that first year.  I believe the reference to the snapshot date (the “IAA”) is in error, because the snapshot date could be many years before the application date.  I suspect they meant (and will likely apply) the application date.  If this new policy is adopted, it will be interesting to see how the policy is applied when, during that first year, the community spouse dies and leaves his/her assets to children or other beneficiaries through testamentary instruments.

2)      A proposed change to BEM 546, page 3, clarifies that a married person on the MIChoice Waiver program can divert income to support the community spouse without divestment concerns.

3)      A proposed change to BEM 401, page 8, further clarifies that transfers to a pooled accounts trust (Exception B Trust) by a person over the age of 65, is divestment.

Also released were some immediately effective policy changes, which include a reference to Medicare Set Aside Agreements, and specifically that they are neither assets nor income for Medicaid eligibility purposes.  It is interesting that the policy specifically references only the use of MSAs in worker’s compensation settlements.

Ladybird Deeds: Readers Digest Version for Upcoming Program


I am presenting on ladybird deeds at the upcoming State Bar Solo and Small Firm Institute, September 19-21.  Still time to sign up.  Following is an abbreviated version of what I will be covering.


A ladybird deed is an odd duck that serves as a valuable estate planning tool in limited situations, but which plays a much more important role in Medicaid post-eligibility planning.

Basically, a ladybird deed allows the owner(s) of real estate to designate a beneficiary on the property, with all the same characteristics as a beneficiary designation on a life insurance policy or bank account; including the power to encumber or sell the property without the consent or participation of the named beneficiary(ies).

A ladybird deed is sometimes referred to as an “enhanced life estate” deed.  Other states use ladybird deeds or some statutory variance of it sometimes called a “transfer on death” deed or affidavit.

I don’t know where the name came from.  The name is curious, to be sure.  Is it named after Ladybird Johnson or something else?

Source of Law

We recognize ladybird deeds in Michigan primarily because Michigan Land Title Standard 9.3 says this arrangement is valid under Michigan law.

The Land Title Standard is thin on detail, and there some important questions about these deeds remain unclear.  Most notably, the question of grantee vesting is not addressed by the land title standard.

A recent unpublished Michigan Court of Appeals case addressed the best way to subsequently convey land subject to a prior ladybird deed.

In Estate Planning

Ladybird deeds can serve as simple tools in simple estates with simple schemes to provide clients with a clean result.

In Medicaid Planning

Although ladybird deeds have been used by some planners for decades, the explosion of their use is clearly a function of the role they play in post-eligibility Medicaid planning.

After a client (or the spouse of a client) becomes eligible for Medicaid, where there is an exempt homestead, a ladybird deed can be used to avoid probate and therefore the specter of estate recovery (Because estate recovery currently only reaches probate assets).

Further, and of equal importance, because the ladybird deed does not convey anything of value (it is merely a beneficiary designation) the execution of a ladybird deed is not divestment.  Accordingly, the ladybird deed can be created before or after the Medicaid application is filed, and it does not matter that it is done during the look-back period.

Clearly the ability of people to avoid estate recovery simply by executing ladybird deeds is a thorn in the side of those who expect the estate recovery program to generate revenues.  Accordingly, planners must be realistic about the future of this planning tool, and need to advise their clients about the prospects that the law may change in the future.

Legislation currently pending would eliminate the probate only aspect of Michigan’s estate recovery program, and therefore eliminate the benefit of ladybird deeds in Medicaid planning.  But even if this law is not passed, it would not be surprising for the Department of Human Services to implement policy that seeks to reach property passed by ladybird deed.

Creditor Rights

A Michigan probate court opinion out of Wayne County, written by a highly respected Probate Judge, the Hon. Milton Mack, and which is published in the Quinnipiac Probate Journal holds that an unsecured creditor of the state cannot reach the value of property that passed by operation of a ladybird deed, and further, that the execution of a ladybird deed is not subject to the Fraudulent Conveyance Act.  This author knows of know contrary authority.

SNT’s, ObamaCare and More

A recent unpublished COA opinion raises some interesting issues regarding the probate court’s role in creating special needs trusts, as well as some food for thought on how the Affordable Care Act (aka, Obamacare) may impact decisions in these cases in the future.

In In Re Hope Special Needs Trust a 75 year-old man with mental illness petitioned the probate court for authority to create and fund a self-settled Special Needs Trust (SNT) with about $300,000 which he inherited.  At the time he petitioned, the man was receiving several government benefits, including two means-tested benefits: Supplemental Security Income and Medicaid.  In addition, because of his eligibility for these benefits, the cost to him of staying in the group home in which he resided was for reduced.

The Court found that the man was in fact a protected person, but denied the request to create and fund the SNT and instead ordered the funds be placed in a conservatorship for his benefit.

The COA upheld the trial Court’s decision.

In reaching this result, the trial Court found that the resources the man had were sufficient to privately pay for his care needs, including any increase in rent at the group home, and that the petitioner did not fully appreciate that trade-off that he was making, which was that he was giving up the ability to leave any unused portion of his estate to his heirs in return for continuing to receive modest government assistance through these means-tested programs.  Interestingly, the Court stated that this man did not understand what his attorney had him sign, a seeming slam on the attorney (no doubt, one of our several fine Yooper elder law attorneys, as this case came out of Chippewa County.)

So the conclusion of this trial Court was that the best interests of the protected person were not being served by the relief requested. This case should remind those of us who do this work that once the authority of the probate court is invoked, the court has the ability to independently analyze the situation and make its own determination about what is in the best interest of the protected person.

[An interesting side issue in this case is that the petition requested the funds be put in a pooled accounts (d4C) trust.  This is interesting because it is divestment to fund a pooled accounts trust after age 65 for Medicaid purposes. BEM 401, page 7.  It appears this individual was not in a Medicaid program where divestment is an issue, and the facts suggest that he was not likely to pursue these divestment programs (the long term care programs) anytime soon, if ever.  It is also interesting because, were this a first-party (d4A) trust, and were this individual under the age of 65, the issue of cutting out the heirs would have been mitigated since a first-party trust could have left the remaining resources, after reimbursement to the state for medical expenses paid by Medicaid (which in this case it appears would have been minimal) to the heirs or beneficiaries, seemingly removing the Court’s primary objection to the plan.]

Now the Obamacare issue.

Assuming Obamacare stands, in the future, purchasing health insurance for people who have preexisting conditions will not be an issue.  That means there will be fewer situations where SNTs are needed where the purpose is primarily to realize government health care benefits.  That doesn’t mean the other benefits of SNTs are lost or that some government benefits, like services through Community Mental Health which may not be obtainable without Medicaid eligibility, won’t still exist.  It does mean however, that the analysis will be different, and that in more situations the attorney will likely arrive at the same conclusion that this Court did, that the protected person can afford to pay for their care needs without establishing an SNT.

“Elder Abuse” Bills Passed and Pending

Over the last few years Michigan lawmakers have cooperated with some aging advocacy groups to develop a package of laws intended to deter abuse of older adults.

In June, Governor Snyder signed ten of those bills into law.  Eight bills in this package remain pending.

Most of the bills that have been signed into law deal with criminal charges for financial abuse and reporting requirements for physical abuse and neglect.  As such, they have little relevance to most probate attorneys.

An exception among the bills that are now law is Senate Bill 461 (Public Act 173 of 2012).  To read the new law click here:

First, SB 461 modifies the so-called “slayer statute” (MCL 700.2802 – 700.2804).  The slayer statute has long held that a person convicted of murdering someone cannot inherit from the person they murdered.  That statute is now extended to preclude a person convicted of a felony financial exploitation crime from inheriting from the person they exploited; unless, after the conviction, the victim of exploitation creates new estate planning documents (or modifies existing ones) to expressly include the perpetrator of the crime.

SB 461 also expands the role of a guardian ad litem in an adult guardianship matter to require them to provide additional information to the ward and the court.  A new form outlining the rights of a guardianized adult is to be created which the GAL will be required to serve on the ward as part of his/her duties.  These changes will appear in MCL 700.5306.

Finally, SB 461 requires probate courts handling guardianship matters to inquire as to the possible need for a conservator in each case, and for the guardian ad litem and guardian to report the resources of the ward to the court so that it can make this determination.  These provisions now appear in MCL 700.5319.  Where a conservator is appointed, and where the amount of assets “readily convertible into cash” exceeds the amount for a small estate pursuant to MCL 700.3982, the court is required to set bond or explain why it has not done so.  These changes appear in MCL 700.5410

As indicated above, there are more “elder abuse” bills pending.  The most troublesome of those deals with the disclosures required by banks to parties seeking to create joint accounts.  Having litigated the joint account/convenience account issues before, I have concerns about these proposed laws.  Such notice laws, while intended to alert to elders to the risks of establishing joint accounts, will likely only make it harder to set aside the unintended survivorship rights resulting form the creation of these accounts if these bills become law.  These proposed changes are currently found in Senate Bills 456,460, 604 and 605.

Three other pending bills, Senate Bills 467, 706 and 777, would make it harder for annuity salespersons to sell inappropriate annuities to senior citizens.  A good thing.

Trending Up: Medicare Set Aside Agreement

This is an important probate issue, although admittedly one that many probate lawyers may never come in contact with.  The topic is Medicare Set Aside Agreements (MSAs).  This topic is significant to those probate attorneys who work with plaintiff’s attorneys to assist in settlements of personal injury actions and workers compensation claims.


MSAs are used to hold a portion of the funds received from settlements to pay for health care expenses that Medicare would otherwise pay for.  The idea is that when someone is injured and receives a settlement, the settlement funds represent a variety of damages, including future medical expenses.  If the injured person is, or is expected to become, covered by Medicare, an MSA holds a portion of those funds to pay for medical expenses incurred in the future so that Medicare is not charged for medical expenses that have already been paid for by a third party (the defendant).

MSA have traditionally been used exclusively in the worker’s compensation context.  The federal entity that runs Medicare (CMS) has long established rules and procedures for settling workers compensation claims: when MSAs are required and how to have the MSA, and the amount of the settlement placed in the MSA, approved.

What’s New

Over the last few years there has been a push to require MSAs be used in liability actions (traditional personal injury cases).  The push has come largely from annuity companies and other interests that operate in the workers compensation world.  They see liability claims as a new and large market for their products and services.

Although the federal law on this point has always cryptically required parties to liability settlements and judgments to “consider Medicare’s interest” in settlement proceeds, CMS has never required liability actions to use MSAs and they have no procedure for having MSAs approved in that context.  However, more recently it appears that those pushing for the expansion of MSAs into the liability arena are gaining traction. It appears we may have, or may soon have, a requirement that MSAs be used in larger liability cases where the plaintiff is, or is expected to become, a Medicare beneficiary.  Defense counsel are already demanding this issue be addressed in larger cases.

The application of MSAs to liability matters would be more complex than in workers compensation, for among other reasons, the allocation of fault among multiple defendants as well as the allocation of damages between future medical costs and the many other possible forms of damages suffered and recoverable in these cases as opposed to workers compensation matters.

It is also important to recognize that a full fledged adoption of MSAs into the liability world is a very bad thing for plaintiffs.  In a worst case scenario, such a requirement could dramatically reduce the benefit realized by the plaintiff in these matters, for the reason that in many cases a substantial portion of the settlement could become unavailable to them, set aside to replace care costs that would otherwise be paid by Medicare.

Of course Special Needs Trusts (SNTs) have long been part of the probate work that arises in the context of assisting personal injury lawyers with settlements.  This will not change.  What may change is the need to also develop and fund MSAs (or SNTs that can also operate as MSAs).