A Michigan appeals court rules that a trial court erred in dismissing a woman’s suit against an elder law attorney she hired to help her father qualify for Medicaid. The court rules the daughter and the attorney had an attorney-client relationship and that funds the daughter expended for her father’s care while awaiting Medicaid eligibility belonged to her, not the father. Schmidt v. Smith (Mich. Ct. App., No. 300718, March 29, 2012). Unpublished.
Carolyn M. Schmidt hired Lansing, Michigan elder law attorney Denise M. Lafave Smith to help Ms. Schmidt’s father, Hubert Wade, secure Medicaid eligibility for his nursing home care. On attorney Smith’s advice, Ms. Schmidt spent down Mr. Wade's assets as his attorney-in-fact, and his remaining non-exempt assets were transferred to a bank account that was jointly owned by Ms. Schmidt and her husband.
Ms. Schmidt then completed her father’s Medicaid application and submitted it to the Department of Human Services (DHS) on August 31, 2007. It is disputed whether attorney Smith ever reviewed the application beforehand. The application was denied and attorney Smith filed a notice of appeal with DHS to preserve Ms. Schmidt’s right to appeal but then failed to respond to any of Ms. Schmidt’s “numerous” calls. In February 2008, Ms. Schmidt retained another attorney, who withdrew the appeal and filed a new application, which was eventually approved. While Mr. Wade's approval for Medicaid was being sought, and during the “penalty period” following his approval, Ms. Schmidt continued to pay for Mr. Wade's nursing home care from the money she had transferred.
On October 1, 2008, Ms. Schmidt filed a malpractice lawsuit against attorney Smith, claiming that attorney Smith failed to provide adequate advice regarding the spend-down of Mr. Wade’s assets and that her inattention to the appeal caused undue delay. Among other damages, Ms. Schmidt sought the costs associated with Mr. Wade's nursing home care during the several-month delay in getting the Medicaid approval, as well as the fees she paid to the other attorney to secure Medicaid coverage.
A trial court granted attorney Smith’s motion for summary judgment, agreeing with her that Ms. Schmidt’s damages merely constituted a potential loss of inheritance. The trial court further agreed that all relevant expenditures were paid with Mr. Wade's money, making any loss to Ms. Schmidt merely speculative. The trial court declined to address whether Ms. Schmidt and attorney Smith had an attorney-client relationship.
The Court of Appeals of Michigan reverses. The court first concludes that Ms. Schmidt and attorney Smith had an attorney-client relationship, in part because the retainer agreement identified Ms. Schmidt and her husband as “Client.” The court also finds that the assets spent on Mr. Wade’s medical care belonged to Ms. Schmidt. “By definition,” the court writes, “Wade could not become eligible for Medicaid unless he transferred his assets to another person. As discussed earlier, Wade transferred his assets to plaintiff, and as such, any loss of these assets would be plaintiff's loss.” The case is remanded for further proceedings.
For the full text of this decision, click here.
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