Crisis Medicaid Planning The Promissory Gift/Loan Plan

As you know, a person will be eligible to have his or her long term care costs paid for by Medicaid when that person - the “Applicant” - has assets and income that meet certain state-mandated levels, and when the Applicant is no longer subject to a penalty period which was imposed as a result of uncompensated transfers of assets during the sixty (60) months immediately preceding the date the Medicaid application was submitted. When the Applicant is receiving nursing home care but has done little or no prior long term care planning, Burke & Casserly can assist the Applicant and the family in securing eligibility for these Medicaid benefits, even when the Applicant has significant assets.

In 2006, the Medicaid eligibility rules changed. At that time, asset preservation was thought to be in serious jeopardy. Our law firm was instrumental in confirming that an additional long term care planning technique is available for use by those persons in need of immediate nursing home care. Planning opportunities for persons in crisis - persons newly admitted to, or about to be admitted to, a nursing home were thought to be scarce, or even nil. Burke & Casserly is proud to have been one of the pioneering law firms in the state to have identified, implemented, and successfully proven through litigation that last-minute planning was still possible. Our firm advocated strongly that a legitimate planning technique which coupled the use of a gift and a promissory note was permissible under the law. While the local Department of Social Services at first rebuffed this notion and denied our applicant’s Medicaid benefits, we appealed those determinations and won at administrative hearings. The administrative hearing officers agreed with our position - the use of a custom drafted promissory note, coupled with a finely calculated gift, is a legitimate and permissible method of long term care planning to save a portion of a Medicaid applicant’s assets.

We colloquially refer to this as our “Gift/Note Plan” and we are happy to report that such types of plans are being utilized throughout New York State to enable Applicants to preserve some of their hard-earned assets for their families.

The plan begins with a determination of a variety of factors: (1) the daily rate of the nursing home providing care; (2) additional monthly medical expenses; (3) the gross income of the Applicant; (4) the permissible deductions from income of the Applicant; (5) the total value of all assets in the Applicant’s name, including cash values of life insurance, annuities, certain retirement accounts, joint accounts, real property, investment accounts and bank accounts; and (6) the total value of all prior transfers which will cause ineligibility under the Medicaid eligibility rules. With this information in hand, the experienced elder law attorneys at Burke & Casserly can determine the two components to the Gift/Note Plan: the size of the gift that can be made, and the size of the loan to be made and the term over which such loan must be repaid. This will determine the value of the assets that can be saved for the family.

The Gift portion of the plan acknowledges that, because of a transfer either outright to other persons (such as children) or to a Trust, a penalty period will be imposed by the County Department of Social Services to which the Medicaid application will be submitted. This penalty period is determined by using a formula that includes the total value of uncompensated transfers (those made in the sixty (60) months prior to the application and those made under the direction of Burke & Casserly as part of the plan) and a regional rate published by New York State.

The Note portion of the plan determines what rate of repayment must be made from the loaned funds and the length of the repayment. The Note will, ideally, run for the same or nearly the same period of time as the penalty period. The Note will have to meet certain legal criteria in order to be considered a valid Promissory note under the Medicaid eligibility rules, and must also yield an income stream in line with the Medicaid income regulations.

With these two things in place, the Gift/Note plan can be implemented. Burke & Casserly has been able to implement a Gift/Note plan to save families’ assets in a variety of circumstances. Some families have been able to protect assets equal to one month’s nursing home costs, while other families have had more complex plans protecting significant sums – sometimes as much as hundreds of thousands of dollars.

We believe that any Applicant interested in preserving assets to pass on to loved ones will agree that the time, costs, and energy required to implement and execute such a Gift/Note Plan is a wise investment that permits the Applicant’s wishes to be carried out.

Upon your retention of Burke & Casserly to perform such Gift/Note Plan, we will ask for a flat fee payment from the Applicant’s funds. Such a fee payment will include a memorandum outlining the basics of the plan and giving you an idea of how it might work in your particular situation. It will then include all phases of the Medicaid application and Gift/Note Plan, and will include follow up and consultation until the County Department of Social Services has approved the Applicant for Medicaid benefits. If you are interested in having an illustration of how a Gift/Plan might work in your particular situation but are not yet ready to undertake the engagement of our firm for the Gift/Note Plan and Medicaid Application, you may request that Burke & Casserly perform such an illustration for you at our regular hourly rates.

It is important to remember that without any planning at all, the Applicant will be required to spend all of his or her assets and income on care before the County Department of Social Services will approve the Applicant for Medicaid benefits. Understanding, evaluating and implementing a Gift/Note Plan under the guidance of Burke & Casserly, P.C., can enable you and your family to ensure ongoing appropriate care while preserving some of your hard-earned assets for your family.

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