The Michigan Court of Appeals reversed the protective orders that were issued in these consolidated appeals, ruling the probate court “put the cart before the horse” when finding that the protective order requirements in the Estates and Protected Individuals Code (EPIC) were satisfied.

The petitions for protective orders in In re Estate of Schroeder (Docket No. 351011) and In re Estate of Almy (Docket No. 351012) were filed before Medicaid applications were submitted or eligibility determinations were made on behalf of Keith Norbert Schroeder and James E. Almy to cover the costs of their long-term care at a facility. The Michigan Department of Health and Human Services (DHHS) objected to the petitions. The Saginaw County Probate Court granted the petitions and issued the protective orders in both cases.

The DHHS appealed, arguing that clear and convincing evidence was not presented to meet the protective order requirements in EPIC, MCL 700.1101 et seq.

The Court of Appeals agreed, reversing the protective orders and remanding both matters.

According to the Court of Appeals, it was particularly troublesome that the probate court considered Medicaid amounts for both Schroeder and Almy, when no Medicaid eligibility and amount determinations had been made at the time the protective orders were issued.

“The probate court here … considered needs in the context of Medicaid-related circumstances even though Mr. Schroeder and Mr. Almy were not receiving Medicaid benefits and were awaiting Medicaid eligibility determinations,” the Court of Appeals wrote. “A nursing home resident who does not qualify for Medicaid coverage will certainly owe considerably more money to the nursing home than a patient-pay amount in a Medicaid setting. The idiom putting the cart before the horse is aptly applicable to the probate court’s analysis. Therefore, reversal is necessary.”

Because the circumstances regarding long-term care and Medicaid coverage had likely changed while the appeal was pending, on remand “the probate court shall consider the circumstances as they actually exist,” the Court of Appeals said.

Judges Jane E. Markey, Patrick M. Meter and Michael F. Gadola were on the panel that issued the published opinion.

Background

In Schroeder, Keith Norbert Schroeder, a protected person, was in a rehabilitation and recovery hospital. His wife, Hedy Pauline Schroeder, was living in the marital home when Jonathan Schroeder, one of their children, petitioned the Saginaw County Probate Court for a protective order. The petitioner claimed a protective order was necessary because his father was unable to effectively manage his property and business affairs due to physical disability and was likely to become a permanent resident in a long-term care facility. The probate court granted the petition over the DHHS’s objection, finding that the criteria in EPIC for a protective order had been met. The resulting protective order transferred Schroeder’s individual and joint interests in assets to his wife, required Schroeder to make support payments to his wife from a portion of his income stream and terminated Schroeder’s spousal rights as to any potential future inheritance. The DHHS appealed the order.

In Almy, James E. Almy was in a rehabilitation center. His wife, Barbara J. Almy, was living in the marital home when she petitioned the probate court for a protective order. She alleged a protective order was needed because her husband was unable to effectively manage his property and business affairs due to physical illness and was likely to become a permanent resident in a long-term care facility. The probate court granted the petition over the DHHS’s objection, finding the criteria in EPIC for a protective order had been satisfied. The protective order transferred Almy’s individual and joint interests in assets to the petitioner (his wife), required Almy to make support payments to his wife from a portion of his income stream and terminated Almy’s spousal rights with respect to any potential future inheritance. The DHHS appealed the order.

According to the Court of Appeals, the probate court issued its protective orders “either before Medicaid applications were pursued or before Medicaid eligibility determinations were made. This panel entered a sua sponte order consolidating the two appeals ‘to advance the efficient administration of the appellate process.’”

Erroneous Orders

In Schroeder, the DHHS argued the petitioner failed to demonstrate by clear and convincing evidence, as required by MCL 700.5401(3)(a), that Schroeder was unable to effectively manage his property and business affairs due to physical injury or illness.

Similarly, the DHHS asserted in Almy there was a lack of clear and convincing evidence that Almy was unable to effectively participate in the management of his own property and income.

“We find problematic the probate court’s consideration of Medicaid and patient-pay amounts in assessing need when no Medicaid eligibility and patient-pay determinations had been made at the time of the court’s rulings,” the Court of Appeals stated. “We understand and appreciate that patient-pay amounts can be estimated before the submission of a Medicaid application and a Medicaid eligibility determination. But in assessing the ‘need’ for money for a person’s support and care under MCL 700.5401(3)(b) on the basis of Medicaid-related circumstances, there must actually be Medicaid determinations regarding eligibility and patient-pay amounts. Indeed, the [In re Estate of Vansach, 324 Mich App 371 (2018)] panel stated that ‘[i]n cases in which an institutionalized spouse is receiving Medicaid benefits, weighing both spouses’ needs and circumstances requires consideration of those needs and circumstances as they actually exist under Medicaid.’”

The Court of Appeals emphasized that, “when a probate court acts to transfer property upon satisfaction of the prerequisites in MCL 700.5401 relative to need, it is imperative for the court to identify the interests being transferred and the value of those interests.” And while the Court of Appeals acknowledged there is no specific language in EPIC demanding this type of information, the panel also pointed out that, “when a court is examining the financial needs of spouses and orders asset transfers on the basis of those needs, a valuation of the assets or interests therein is an inescapable and necessary component of the analysis.”

Looking at Schroeder, the Court of Appeals pointed out that the allegations in the petition were not evidence and the assertions of the GAL, “who is not a medical professional,” did not constitute clear and convincing evidence. “Indeed, the GAL offered somewhat conflicting evidence when she informed the probate court that Mr. Schroeder had been able to confirm the list of assets in the petition and did not object to the request for a protective order.” Therefore, the Court of Appeals held, the probate court shall “revisit this finding on remand, bearing in mind that it is the petitioner’s burden to support the need for a protective order by clear and convincing evidence.”

Turning to Almy, the Court of Appeals said the unchallenged medical report and the GAL’s assessment supported the probate court’s ruling as to MCL 700.5401(3)(a). However, regarding MCL 700.5401(3)(b), the Court of Appeals reiterated that the probate court - in both cases - improperly considered the men’s needs in the context of Medicaid-related circumstances, although they were not receiving Medicaid benefits and were awaiting eligibility determinations.

In conclusion, the Court of Appeals reversed both protective orders and held that, to the extent that any asset transfers are considered on remand, “the probate court shall require evidence concerning the nature of the interest held in a particular asset and the value of the interest in the assets.”