Phone App “document” is a Valid Will in Michigan

It happened and it’s published.

The Michigan Court of Appeals held, in a published decision, that a paragraph posted by a decedent on his phone is a valid will under Michigan law, and specifically, MCL 700.2503.

We’ve discussed Michigan’s uniquely liberal law regarding instruments intended to be wills before. See, for instance, Section 2503 Grows Up (click on name).

In this case, Duane Horton wrote a note in his journal stating that his testamentary wishes could be found on his phone app. They looked and they found it.  The trial court admitted the electronic expression as the decedent’s will under MCL 700.2503. The Court of Appeals affirmed.

Click here to read In re Estate of Duane Francis Horton, II

It’s an important case as it further fleshes out the impact of Michigan’s cutting edge law.

First, it dismisses the number one misconception about Section 2503, which is that it is intended only to fix “minor, technical deficiencies” in documents that would otherwise be admissible as holographic wills or otherwise. The COA holds that the statute doesn’t say that, and doesn’t mean that.  Rather Section 2503 is a stand alone, separate process for admitting testamentary expressions which does not require any formality, only clear and convincing evidence of intent.

Equally important, the case stands for the proposition that an electronic document is a “document” for the purposes of this statute.

These are powerful developments in probate law, and, for better or worse, Michigan seems to be on the cutting edge. Fun issues, fun times.

 

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Sunday Thinking: Moments of Perfection

At this time of year, looking out at the lush Michigan vegetation, I am often reminded of one of Shakespeare’s sonnets – No 15, in which he observes that all things, humans included, experience a moment of perfection.  A moment we build toward and from which we decline.   He reflects on physical perfection, but it makes me think also of the various types of perfection that humans achieve.

Physical perfection is reached very early in life – that age when our bodies are magnificent and require no upkeep. Mental perfection, the accuracy and speed of our minds, comes later, probably in our 30’s or maybe 40’s. And then there is an emotional perfection that can come even later in life when our minds are still sharp but also informed by experience; when we can see the landscape and understand more deeply the decisions we make and our relationship to people and things.

And so Olympic athletes are often just children. Great scientists make their mark in mid-life.  But it is the aged grandparent who can best provide judgment-free and  unconditional love. (And, dare I say, the later-in-life lawyer who can give the best counsel.)

In practice, we see clients and their families, and we recognize the different stages of life that they are in. It’s all part of the planning process.  We often think ahead for them about decline, and try to help them anticipate the challenges they will face.  But sometimes I like to remember how they will evolve from where they are now to other moments of perfection.

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State Supremes Issue Split Decision on Mardigian

Relish the moment because this is as exciting as probate law gets.

We’ve written about the case before (See: This is Awkward).  Attorney prepares an estate plan (will and trust) for non-relative, leaving millions to said attorney and attorney’s family.

Trial court says: An attorney can’t do that under the rules of professional conduct, and therefore the estate plan is void – on summary disposition.

Court of Appeals reverses the trial court. COA says: While the lawyer may face discipline for the ethics violation, the validity of the trust is not implicated by the ethics rule.  That decision was 2 to 1.

Now, the Michigan Supreme Court reviews the Court of Appeals, and it’s a 3 to 3 tie [The 7th Justice abstains because he was on the COA panel that decided it – and was one of the two votes on the prevailing side.]  Apparently a tie means the COA decision is affirmed.

So the issue is whether a violation of the MRPC rule 1.8(c) (which precludes an attorney from creating estate plans for non-relatives in which they receive a substantial benefit) has any role in a trial contesting the validity of the estate plan? The answer is “no, it does not.”  While everyone agrees that the attorney is a fiduciary and that, as such, the presumption of undue influence is in play, the prevailing opinion is that the ethics violation, in and of itself, is not a factor in the case.

It’s a Long Decision

As indicated, there are two opinions, each with 3 signatories. In all it’s 53 pages long.  Click here to read the case.

The three who vote to affirm the COA ultimately conclude that it’s not their role to change the law of undue influence to enforce ethical obligations of the bar. The other three see this as an opportunity to do just that.  Their approach would be to treat a violation of the ethics rule as giving rise to an per se finding of undue influence.  They assert that the law needs to catch up with changes that have taken place since the last time the MSC reviewed this question more than 50 years ago, which changes included the adoption of MRPC 1.8(c).

Each opinion includes a lengthy discussion of undue influence and the presumption. It at least attempts to clarify some of the confusion that exists about the presumption and particularly about how it is rebutted.  This case will no doubt be quoted in litigation going forward.  So if you do this kind of work, you need to read this case.

They’re Making My Point

The Supremes don’t know it, and likely won’t revisit this issue in my lifetime, but their decision demonstrates the point I was trying to make in my recent post: The Imperfect Bandage of Undue Influence (click on name to read it).  My point is that:  Undue influence isn’t cutting it.

In both opinions, but especially the opinion of the non-prevailing Justices, the Justices seem uncomfortable with how difficult it is to prove undue influence and how easy it is for the presumption to be rebutted. For me though, their distress is too narrowly focused.  Even the side that would change the law to prevent this result in this case, would only do so in situations where a lawyer is involved.  From my perspective, it is just as suspicious when a benefiting child or housekeeper prepares the will, deed, beneficiary designation, etc..

So, in conclusion, the MSC has spoken. It’s a long opinion and long awaited by many in the probate community.  The facts of the case and the evenly divided court add a dash of drama.  Required reading for probate geeks.

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MSC Fixes Brody Trust

As previously discussed on this blogsite, the problem with this Rhea Brody Trust case is that the Court of Appeals misconstrued the standing provisions of the Michigan Trust Code in concluding that a child/beneficiary of the settlor has standing to initiate a trust proceeding while the parent/settlor is alive. [See Remainder Beneficiary of Revocable Trust has Standing to Sue Trustee for Breach]. Besides being wrong, the COA’s conclusion was unnecessary because under the facts of this case (including the fact that the settlor was incompetent), the offended party had standing under the Michigan Trust Code.

As with the Brody conservatorship case, the COA decision was appealed to the Michigan Supreme Court and an amicus brief was filed by the Probate Section of the State Bar. As with the Brody conservatorship matter, the MSC received the amicus brief, fixed the problem, and then denied leave as no longer necessary.  However, in this matter, the MSC actually ordered part of the COA’s decision vacated and remanded the matter to the COA to correct their analysis.  So presumably there will be another, more enlightened, COA decision forthcoming.

Click here to read the MSC Order.

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Beneficial Interest in Trust Enough for PRE

In this published decision, the Michigan Court of Appeals goes to great lengths to conclude that a person who lives in a house that is owned by an irrevocable trust, which trust provides this person with a right of occupancy, is an “owner” of the house for the purposes of qualifying for the personal residence exclusion with respect to their property taxes.

Click here to read Breakey v Department of Treasury.

 

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COA Sets the Record Straight on Priorities

This new published Court of Appeals opinion shouldn’t surprise anyone. The COA holds that where a professional guardian/conservator resigns, and the only adult child of the ward petitions to be appointed guardian and conservator, the probate court cannot appoint a new professional guardian and conservator unless it makes a finding that the child is unsuitable.  That’s because the child has priority to be appointed.  The fact that the probate judge by-passed the child and appointed a new professional fiduciary without such evidence was reversible error.

Click here to read In Re Guardianship/Conservatorship of Harold William Gerstler.

The facts are kind of fun: a devious Aunt, a lazy guardian ad litem; but in the end the COA simply reads the statutes regarding priority of appointments and applies them to the facts.

The only thing curious about this case is that it is published. But perhaps the timing of this publication tells us something.  Perhaps, just maybe, the COA is trying to clean up the confusion left from the recently published (and revised and republished) Brody case which said that the statutory priorities were “merely a guide for the probate court’s exercise of discretion.”  [Check out the post “Better Than Nothing?” for a discussion of that case.]

Significantly, the Gerstler opinion also adopts the position that the standard of proof necessary to by-pass a person with priority is as stated in the Redd case: a preponderance. [Click here to read “Seeing Redd”.]

So, when the issue of appointment of either a guardian or conservator is in play, a party with priority is entitled to appointment unless it is shown by a preponderance of evidence that they are not suitable. That means a probate court has to have a hearing and consider evidence to make this decision. I, for one, am glad that’s clear.

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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 VamSach 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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Better Than Nothing?

The Michigan Supreme Court has issued an Order denying leave in In Re Conservatorship of Rhea Brody.  However, this same Order “further notes” that the Opinion of the Court of Appeals which was the subject of the request for leave was reformed after the briefs in the case were filed.

Click here to read the Supreme Court Order.

So, a published COA decision is issued. Leave to the MSC is sought.  Briefs are filed, and then the COA revises its opinion so that MSC is satisfied that there is no reason to hear the case. How about that?

I first wrote about this Brody case (there were two of them, a trust case and this conservatorship matter) in the post: Another Brody Bombshell (click on name to visit that post). As discussed at that time, the opinion was riddled with bad law.  As mentioned in another post (Storm Clouds), our firm was hired by the Probate Section of the State Bar to prepare the amicus brief in this matter, which we did.*

The Probate Section wanted only two issues raised:

  1. The finding that the priority given to a “conservator, guardian, or similar fiduciary recognized by the appropriate court of another jurisdiction” could mean an independent trustee over a trust agreement of which the ward was settlor, which trustee was appointed by the same court hearing the conservatorship matter; and
  2. The statement of the Court of Appeals that the statutory priorities for appointment of a conservator “are merely a guide for the probate court’s exercise of discretion.”

I personally also found the case to be worthy of reversal or remand on a third point, which was that the Court appointed a conservator even where a power of attorney was in place and appeared to be effectively handling the affairs of the ward.

The Order of the MSC informs us that the COA has remedied issue number 1 above by issuing a revised opinion.

The second issue is not addressed, and therefore remains problematic language in this published opinion. Presumably we can now argue that appointment of conservators are not controlled by statutory priorities, but are rather left to the discretion of the trial court.

The third issue likewise remains unresolved, and therefore this case seems to stand in opposition to other cases, such as In Re Bittner.

Click here to read the COA Brody opinion as revised.

Better than nothing, I suppose.

*[Much thanks to CT Attorney Drummond Black for his excellent work on the amicus brief.]

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The Fix Is In

In the process of probate administration, there are certain “allowances” that are paid “off the top” before creditors and beneficiaries get what they have coming.   Among those is the exempt property allowance.  The exempt property allowance is currently $15,000.  It goes to the surviving spouse, but if there is no spouse surviving, it is divided among the surviving children.  Since 2000, it has gone to adult surviving children as well as minor children.

In 2015, the Michigan Court of Appeals issued a published opinion in the case of In Re Estate of Shelby Jean Jajuga (click on the name to read the case). Ms. Jajuga died leaving a will and one surviving child.  The will did not leave anything to the child, and expressly stated that the child should “inherit nothing.”  Notwithstanding this expression, the child made a claim for the exempt property allowance and it was granted.  The Court of Appeals concluded that this was ok, and affirmed what I think most practicing probate lawyers believed the law to be, which is that the child gets the allowance regardless of what the will says.

That result did not sit well with some people, and so legislation was introduced to change the outcome. That legislation recently became law.  Specifically, the change is in the language of MCL 700.2404(4).  Click on the statute to read it.

Because the outcome of Jajuga neither surprised nor offended me, I am not a fan of the fix. But as far as fixes go, I think this one is better than it might have been.  Notably, the way the change is written, it does not eliminate the exemption for children, nor limit it to minor children; but rather the exemption remains as it existed, but can be barred by language in a will expressly cutting out the child or children or by simply eliminating their right to an allowance.

Two observations:

When planning for small estates, lawyers may want to disable the exemption so that the exempt property allowance to a child or children does not significantly alter the resulting distribution where non-children (including descendants of deceased children) are takers. Of course this can perhaps be better addressed by simply defining beneficial interests to include an offset for any allowance received.  The risk of routinely disabling this allowance in wills is that in very small or insolvent estates, doing so would elevate creditors above children.

My second point relates to Medicaid estate recovery. In cases where assets mistakenly end up in probate for a decedent who received long term care Medicaid benefits, the exempt property allowance comes before the State of Michigan gets repaid for their estate recovery claim.  The way the fix is written, this remains true.  This will allow children in these cases to continue to have good reason to open the estate, and place them in a better bargaining position with the State with respect to settling estate recovery claims.

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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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