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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.

MSC Takes Its Shot at Estate Recovery

The Michigan Supreme Court has released an opinion in four combined cases all involving Michigan’s Medicaid Estate Recovery Program.  As we’ve learned from prior posts, the Michigan Court of Appeals has not been a friendly environment for Medicaid long term care planning (see for instance the “Bloody Thursday” from just a few weeks ago).  Well it turns out the Supremes are even less welcoming.

In their opinion the Michigan Supreme Court concludes the Court of Appeals was too generous in calculating the start date for estate recovery. They hold DHHS can go back to July. 2010.  The Supremes reject all constitutional arguments or considerations, and address the “house of modest value” issue by vacating those portions of the Appeal’s Courts decisions that discuss it.

Click here to read In Re Rasmer Estate, Gorney Estate, French Estate and Kethcum Estate.

Appreciation for all who have worked so hard on this issue. It appears however that the time has come to let it go.


Estate Recovery – Last Gasp or Second Wind

Thursday, January 12, the Michigan Supreme Court is scheduled to hear oral arguments in several combined matters all relating to the issue of Medicaid estate recovery. The main issue in these cases is whether the manner in which the State implemented the estate recovery program gave those Medicaid beneficiaries who were subject to recovery sufficient notice of their rights and responsibilities – i.e. Was it fair? To read the briefs that have been filed in this matter, click here and follow the links.

This hearing is the culmination of years of litigation in local courts throughout Michigan, followed by several of those cases being appealed to the Michigan Court of Appeals.   While many local judges ruled in favor of the elder law attorneys who fought these cases, to date, as readers of this blogsite know, the appellate courts have not been nearly as friendly.  But those have all been COA cases. Perhaps the MSC will be kinder.

The State Bar Elder Law and Disability Rights Section has funded the Appellant’s case. They’ve invested a lot and have a quality product to show for it.  But one wonders what they expect to come of it.  While it’s possible the MSC could decide that every case in which the State has collected money under the estate recovery program was defective and the money should be refunded, that seems highly unlikely.  At best, perhaps, relief for the named plaintiffs and some instruction to the State to do better in the future. At worst, a stamp of approval on the process as it was followed.

In any event, one can’t knock the advocates for pushing back. The implementation of estate recovery in Michigan has been a long and curious process.

And in other news: dower is dead. The lame duck session of the Michigan legislature passed laws abolishing this relic of the common law.  No surprise here.  To read more on dower, click here.

A Bridge Too Far


When clients come in with really difficult problems, we all try to come up with creative solutions to get them out of the jam. But there is a line where “creative solutions” ends and “WTF give it a try, there’s nothing to lose” begins.  File this unreported COA case in that second bin.

Lyle was on Medicaid and had an exempt homestead. He only owned 50% of the home because well prior to applying for Medicaid, he had made his home joint with his child, Steven.  The language of the deed however clearly created a tenancy-in-common, meaning that Lyle and Steven each owned 50%.  Lyle died and the State of Michigan filed a claim for estate recovery against Lyle’s 50%, claiming nearly $50,000.

Attorney consulting on the estate recovery issue, decides that the solution is to go to court and have the deed “reformed” so that upon Lyle’s death, the entire ownership interest went to Steven, as would have been the case had the deed been drafted to provide for survivorship rights. The argument, which is probably exactly true, is that Lyle no doubt believed that the deed he signed meant that his house would go to Steven when he died.  The local judge went along with the reformation/strategy/scheme/charade, but, unsurprisingly, the Attorney General (representing the Department of Health and Human Services) appealed.  The Court of Appeals reverses the trial court, and holds that Lyle’s 50% is in his estate and subject to the estate recovery claim.

So, while I’m sure many of us can appreciate the “nothing to lose” thinking that went into the effort (and I suspect I would have given the idea some consideration), the fact is that the Attorney General is on a roll in Medicaid cases that go up to the appellate courts, and the result from the COA in this case shouldn’t be a surprise. If so inclined, read the case by clicking here.

New Policy undermines LTC Partnership Insurance Benefits

Foolish me. I got excited about the implementation of a long term care insurance partnership program in Michigan, and have written about it here several times.

As previously discussed, the law, which was finally implemented just this spring, provided two benefits to those who purchased and used a LTC partnership policy: (1) an increased asset protection at the time of application, and (2) an equivalent protection of those assets at death from Michigan’s estate recovery program. For a simple example, if a single person purchased a partnership policy which paid out $300,000 in benefits to that individual, that individual could apply for Medicaid and be eligible when they had countable assets of less than $302,000 ($2,000 as the usual asset limit, plus $300,000 as a benefit of having purchased the insurance).  Likewise, at death, this individual would have an “asset disregard” of $300,000 from the estate recovery program.  The concept is to incentivize people to buy LTC insurance and in return the State would provide them with greater asset protections if they exhaust their resources and turn to Medicaid for assistance.

Seemed reasonable and even creative. But apparently state policy-makers thought the deal was too sweet for the consumer.  Hence they are changing in the definition of “estate” as it appears in the State Medicaid Plan so that the asset disregard related to estate recovery is essentially negated.  Specifically the new policy will change the definition of an “estate” to be as follows:

… If a decedent received (or is entitled to receive) benefits under a long-term care insurance policy and had assets or resources disregarded, pursuant to 42 USC 1396p(b)(4)(B) “estate” includes all real and personal property and other assets in which the decedent had any legal tittle or interest immediately before or at the time of death to the extent of that interest, including but not limited to, assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, transfer-on-death deed, payable on death contact, promissory note or other arrangement.

This means that the exempt assets, including one’s house, would be considered as part of the asset disregard for estate recovery, and that the value of the home would be counted even if it passed to others at death by ladybird deed or otherwise in a manner which would avoid estate recovery under current rules.

The long term care Medicaid application now includes matching language. It says:

If you have received an asset disregard due to a long-term care partnership policy, Estate Recovery applies to all assets whether they are subject to probate administration or not.

After all is said and done it looks like the energy that so many put into making the concept of a long term care insurance partnership meaningful in Michigan will not be realized thanks to the efforts of the state bureaucrats who seem obsessed with the perception that the people of Michigan, and especially their planners and counselors, are all part of a conspiracy to rip off their system.

Thanks much to my colleague David Shaltz for ferreting out this development.

Nothing New: DCH Wins Again

The Court of Appeals has issued yet another published opinion re Michigan’s Medicaid Estate Recovery Program.  Click here to read In Re Estate of Catherine Klein.  The case repeats the factual circumstances of prior estate recovery cases – and the result, not surprisingly, is the same.  Hard to understand why this opinion is published – but estate recovery ophites may choose to read it.

And So It Ends – Perhaps

The Ketchum case discussed in more detail in a prior post was just released. It is a published Court of Appeals opinion.  Click here to read the case.

This case arises in the context of a series of cases that have been decided by the COA since Michigan first adopted an “estate recovery” law in 2007. Each case has addressed the proper interpretation of that statute.  In each case the position of the Department of Community Health has been upheld.  The same is true in Ketchum

Whereas prior cases focused on the issue of proper notice to impose an estate recovery claim, Ketchum was the first case to address the so-called “home of modest value” exemption; which purports to exempt an amount from estate recovery, which amount is equal to 50% of the average home value in the county in which the house is situated. The issue was whether this exemption is as simple as the statute suggests, or whether the home value is only one factor in determining whether this “hardship waiver” is available.  As explained in prior posts, the requirements for obtaining this exemption as set forth in DHHS policy go far beyond the simple valuation analysis.

In Ketchum, the decision of he COA turns on the unusual fact that after the death of the Medicaid beneficiary, the house was sold. Accordingly, it could be argued that the case does not foreclose the possibility that situations in which the house is retained would not be controlled by this decision.  But the dicta of the case suggests otherwise.  The COA takes pains in its decision to equate this case to prior estate recovery decisions, and specifically to the provisions of the statute that allow DCH to negotiate terms and conditions regarding Michigan’s estate recovery program, and to include additional requirements not specifically addressed in the law.

This whole process of watching the law of estate recovery go from a statute, to policy and then through the Courts to clarify the appropriateness of policy; and where the line between law and policy is drawn, would make a great case study for law students. The suggestion could be made that the deck was stacked against advocates in the process, and that each of these opinions, adopting the Department’s position, was driven less by a desire to “get it right” than by the desire to endorse the Department in whatever they chose to do.  Aging advocates will no doubt be left with some frustration – perhaps justified.  In any event, this is our system.

While there remain legal theories that could continue this battle, it is uncertain whether anyone will have the time or inclination to pursue those avenues. In the meantime, this appears to be the end.

Click here to read the prior post on Ketchum.

Estate Recovery Timing Rule Clarified

The Court of Appeals issued a published opinion in four estate recovery cases that were combined for the purpose of this opinion. Click here to read the opinion.

In each case the following facts were in play:

  • Someone began receiving long term care Medicaid benefits before the State of Michigan started putting language in the Medicaid application that notified applicants that the property in their estate would be subject to recovery under Michigan’s estate recovery program; and before Michigan’s estate recovery laws had received federal approval.
  • At some subsequent date they filed a redetermination application which included language notifying them about the estate recovery program.
  • In July 2011, the federal government approved Michigan’s estate recovery plan.
  • The Medicaid beneficiary died with assets in a probate estate.
  • The State of Michigan filed a claim in the estate seeking recovery for benefits back to July 2010.

In this case the Court of Appeals held that the State is limited to collecting on estate recovery claims to the period after July 1, 2011, the date the COA finds that Michigan’s estate recovery program obtained federal approval.

It is interesting that these exact facts were in play in the In Re Keyes Estate [click on the name to read opinion] which first announced that the estate recovery language in the Medicaid application was sufficient to give notice; and held also that even if the notice language was not provided to the Medicaid beneficiary when they first began receiving assistance, the State was not prohibited from bringing an estate recovery claim against their estate if they subsequently did get written notice. However, and somewhat amazingly, the Keyes case failed to clearly state when the claim would begin – which became the issue in these cases.  This opinion closes that loop.

There are some other interesting issues and dicta in this opinion, including dicta about the ability of the State to pursue estate recovery claims against estates of de minimus value.

It is also interesting to observe that there was a dissenting opinion in this matter. One Judge concludes that the result in these cases is controlled by the Keyes decision, and even if Keyes did not clearly address this issue, this Judge opines that the result should be that the State is not precluded from going back to 2010.

Will the State seek leave to the State Supreme Court?  We’ll see.

For clarification, this is a different issue than the issue addressed in the post immediately prior to this post regarding the hardship waiver and the Ketchum case.  We are still awaiting that opinion.

Ketching Up on Estate Recovery

Tomorrow, Tuesday, is a red letter day in the elder law world. The Court of Appeals will hear oral arguments in the matter of In Re Estate of Ketchum.

Ketchum is the fist case that has gone up to the COA to address that portion of Michigan’s estate recovery law which excludes an amount equal to 50% of the average home value. Specifically, Michigan’s estate recovery law, MCL 400.112g, says:

(3) The department of community health shall seek appropriate changes to the Michigan medicaid state plan and shall apply for any necessary waivers and approvals from the federal centers for medicare and medicaid services to implement the Michigan Medicaid estate recovery program. The department of community health shall seek approval from the federal centers for medicare and medicaid regarding all of the following:

  1. An exemption for the portion of the value of the medical assistance recipient’s homestead that is equal to or less than 50% of the average price of a home in the county in which the medicaid recipient’s homestead is located as of the date of the medical assistance recipient’s death.

This is versus what the subsequently adopted policy actually provides, as set forth in BAM 120, at pages 8-9 [click here to read]. That policy characterizes this exception as a hardship waiver, and establishes almost unachievable thresholds to qualifying.  The policy goes well beyond the plain language of the statute, and essentially eviscerates the protections the legislature presumably intended when it was passed.

Best foot forward. The good news is that attorney David Shaltz of Chalgian and Tripp will be making the oral argument in this case.  Nobody is better qualified to handle this argument, and to explain the law and history that underlies it.  Thanks to Attorney Charlotte Shoup, the attorney who represents the estate, for graciously inviting David to take on this role.

Conclusion. Expect several weeks or months before a decision.  Expect a published decision.  But don’t get your hopes up.  In its recent opinions on Medicaid long term care issues, the Court of Appeals has not been a friendly place.

Important October BEM Changes

DHHS released new BEM language to take effect October 1, 2015. Click here to read them. Of particular note are the new provisions for long term care partnership insurance payments and care contracts.

As to the long term care insurance partnership, this concept has been addressed in prior blogs. What we learn from the new language is that the protection will only apply to payments actually made to or for the benefit of the insured. Meaning that the supplemental asset protections accrue only as the benefit is received (as opposed to simply allowing for a supplemental asset protection in the amount of the total benefit purchased).

The new long term care insurance language expressly precludes assets protected by the partnership policy payments from estate recovery.

The language regarding care contracts is more troubling. These changes arise out of the Jensen Court of Appeals decision, also discussed in prior blog posts here.

The new care contract provisions segregate contracts for personal care and home maintenance.

The presumption of gratuitous care only applies to relatives. However, and importantly, the requirements of having a Medicaid compliant contract applies to relatives and non-relatives equally.

The new provisions preclude any payments after the person receiving care is in a nursing home or “adult foster care home (licensed or unlicensed)” [I think they mean “assisted living facility”] = a big problem for professional care providers hired to supplement care particularly in ALFs.

For clients applying for Medicaid who have received personal care assistance, even through a professional agency, the new policy will require providing the contract to DHHS for review.