The Use of Promissory
Notes to Protect Assets
With the use of a properly drawn Promissory Note, some assets can
still be protected after someone is in a nursing home - typically
less than 1/2.
THE
GOAL:
To gift and protect a portion of a nursing home resident's
assets. A gift, referred to by Medicaid as a transfer, will
create a period of time an applicant will be ineligible for
Medicaid. This time period is commonly called the penalty
period. We then need to have funds available to pay the
nursing home throughout the penalty period.
THE
PROBLEM:
The new law says that the penalty period doesn't start until the
applicant is both institutionalized and resource eligible.
Therefore, we cannot simply leave the client's funds in their bank
account to pay the nursing home throughout the penalty
period.
THE
SOLUTION:
The promissory
note is created and is the tool that we use to convert the
available resources (the non-gifted funds) to a monthly income
stream. As long as the promissory note is created correctly
and meets certain criteria, the funds can no longer be counted as a
client's assets but as income source. These monthly income
payments, along with a client's normal monthly income such as
Social Security and any pensions will then be used to pay the
nursing home throughout the penalty period.
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