Medicaid Promissory Notes: Gift and DRA Compliant Transactions, Shielding Assets, Safe Harbors, Spousal Refusals

Medicaid asset protection requires advance planning, but it doesn’t always happen that way. A sudden illness requiring immediate long-term care placement or a degenerative diagnosis requiring extended care can devastate a family’s finances. A critical method in protecting income and assets as permitted under the law is the use of promissory notes.

Before the enactment of the DRA, a Medicaid applicant could provide documentation to show that a transaction was a loan rather than a gift at the time of the Medicaid application resulting in such amounts not being counted as an asset. The DRA imposed restrictions on the use of promissory notes, loans, and mortgages and such transactions must be DRA compliant to avoid hindering Medicaid eligibility.

A Medicaid applicant's assets and income must meet certain state-mandated levels, and any transfer of assets can't be subject to the penalty period once an application is submitted. The applicant must prove that any transfers were for reasons other than qualifying for Medicaid to avoid a penalty for transferring assets without receiving fair value in return.

Listen as our distinguished panel experienced in Medicaid asset preservation reviews the eligibility requirements and discusses best practices in using promissory notes and other approaches to preserve the assets of senior clients facing a Medicaid eligibility crisis.

1. Analyzing the promissory note strategy
2. Structuring gift and DRA compliant transactions and key provisions
3. Securing DRA promissory note safe harbor
4. Using promissory notes for community spouses
5. Promissory notes and spousal refusal

The panel will review these and other key issues:

• What are the benefits of using a qualified promissory note for Medicaid planning and long-term care?
• What are the key considerations in structuring gift and DRA compliant transactions and key promissory note provisions?
• How can applicants secure DRA promissory note safe harbor?
• How can qualified promissory notes be used with community spouses?
• Using promissory notes and the impact of spousal refusal options
• Best practices to convert clients' Medicaid-countable assets to exempt assets