Promissory Notes for Medicaid Planning in New York

What Is a Promissory Note in Medicaid Planning?

A promissory note is a legally binding agreement where one party loans money to another with a promise of repayment over time. In Medicaid planning, this tool is part of a half-a-loaf strategy: a method that protects approximately half of the applicant’s assets while allowing Medicaid eligibility to be achieved sooner.

Here’s how the strategy works:

• Roughly half of the assets are gifted, which creates a penalty period during which Medicaid won’t cover nursing home care.
• The remaining assets are loaned through a promissory note to a trusted individual.
• The repayments from the loan, combined with the applicant’s monthly income, are used to help pay the nursing home during the penalty period.
• Crucially, these payments must fall slightly short of the actual facility costs, leaving a small outstanding balance each month. This shortfall is necessary in order for the penalty period to begin and run on the gifted assets.

This strategy allows applicants to preserve approximately half of their assets, depending on income levels and facility costs, while still securing the care they need.

To comply with Medicaid rules in New York, a promissory note must:

• Be actuarially sound, meaning the repayment term fits within the lender’s life expectancy.
• Require equal monthly payments, with no balloon or lump-sum payments.
• Prohibit cancellation of the debt upon the lender’s death.

Our attorneys ensure that each note is structured with precision to meet these legal standards and avoid costly Medicaid penalties or delays.

Schedule a free consultation with Raiser and Kenniff, P.C. by reaching out online or calling (888) 646-0025 today!