Promissory Notes Now Valid to Assist Medicaid Eligibility

Medicaid is often a primary source of funding when a senior citizen is in need of long-term care. In order to be eligible for Medicaid, you must follow strict income and resource guidelines. More specifically, although there are some assets exempt from Medicaid eligibility determinations under state and federal law, you typically must have less than $2,000 in countable assets in order to qualify for Medicaid. In many situations, you must spend down assets or otherwise dispose of them by purchasing exempt assets in order to meet the asset limits for Medicaid eligibility. Medicaid regulations, however, prevent individuals from transferring or giving away assets for less than fair market value, in an attempt to qualify for Medicaid. When you apply for Medicaid, there is a five-year “look-back” period. This means that if you made any unauthorized transfers of property within the five years prior to your Medicaid application, you will be ineligible for Medicaid for a certain period of time as a penalty.

A promissory note is a written contract in which you agree to pay a certain sum of money to another party at a specific point in time, or on demand, in exchange for goods, money loaned, or services. In the past, some individuals tried to simply execute a promissory note divesting them of certain assets in order to make those assets unavailable for the purposes of Medicaid eligibility determinations. The recent change in Wisconsin law creates a rebuttable presumption that a promissory note is negotiable and that its value is the outstanding principal balance as of the date that you applied for Medicaid. According to Wisconsin Department of Health (DHS) policy, promissory notes that are not divestments are countable assets for determining Medicaid eligibility, as they are transfers of assets for less than fair market value.

Therefore, in order to prevent a promissory note from being seen as a countable asset for Medicaid eligibility purposes, it must meet all of the following criteria:

  • The repayment terms stated in the note are actuarially sound and comply with federal standards;
  • Payments on the note are made in equal amounts at set times and there is no provision that cancels the note’s balance upon the death of the lender.
  • The promissory note is negotiable, assignable, negotiable, and enforceable, with no terms that make the note unmarketable.

Therefore, if you want to use a promissory note to make assets non-countable for the purposes of Medicaid eligibility, the note must be a divestment, in that it is non-negotiable, non-assignable, or has no market value. Since a promissory note must be very specific in nature in order to make assets non-countable for Medicaid eligibility purposes, you need an experienced Medicaid planning attorney who can ensure that your goals are met.

The costs of nursing home care aside, the lawyers of Boller & Vaughan know the devastation that can occur when nursing homes and other long-term care facilities breach regulations concerning health, safety, and admissions. Fortunately, we have the knowledge and the experience to help you through any type of elder abuse or neglect claim, particularly when injury results from a wholly preventable issue. No matter what type of nursing home facility abuse or neglect is at issue in your case, we can help. All too often, residents and their families are reluctant to demand justice for situations that occurred in the resident’s care. In this situation, you can count on your Madison elderly abuse attorneys to guide you through every step of the personal injury claims process.


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