NY Emergency Medicaid Planning With Promissory Notes

It is not too late to preserve your assets after you are admitted to a New York nursing home or assisted living facility. There is a method for preserving your assets from nursing home and assisted living costs even if you have never done any prior Medicaid planning. “NY emergency Medicaid planning with promissory notes” allows you to preserve half of your assets so that only one-half your assets are spent on nursing home or assisted living care.

NY emergency Medicaid planning is recognized by the New York courts and by county Departments of Social Services. You can protect one-half of your assets with NY emergency Medicaid planning, even if you are already in a nursing home or assisted living facility. This is one of the many exceptions to the Medicaid five-year look back period.

The monthly amount to be paid back to the resident is calculated using the nursing home’s daily rate less the resident’s monthly income. Upon payment of the monthly amount to the resident, the resident writes a check for the same amount to the nursing home. The note repayment amount, together with the resident’s income, covers payment to the nursing home during the penalty period (number of months) incurred by the transfer of the other one-half of the gifted assets. The loan payments are calculated to end at the same time that the penalty period on the gifted assets ends, thereby making the nursing home resident Medicaid eligible on that date. The family member(s) will keep one-half of the gifted assets free and clear.

How is NY emergency Medicaid planning with promissory notes implemented?

There are seven steps to taking advantage of NY emergency Medicaid planning with promissory notes:

STEP ONE: Do not take any action without first consulting with a New York Elder Law Attorney. Medicaid laws are constantly changing and subject to various interpretations.

STEP TWO: The NY nursing home or assisted living resident makes a gift of all assets (less the 2024 resource allowance of $31,175 plus a $1500 burial account) to a family member.

STEP THREE: The family member signs a promissory note promising to approximately one-half of the gift plus interest to the resident on a monthly basis The promissory note must meet these requirements:

1. The promissory note must be actuarially sound. The repayment term of the loan must not last longer than the life expectancy of the lender.
2. Payments must be made in equal amounts during the term of the loan with no deferral of payments and no balloon payments.
3. The note cannot be cancelable upon the death of the lender.
4. It must be non-negotiable.

STEP FOUR: The resident files a Medicaid application.

STEP FIVE: The Medicaid application is denied solely on the basis of this uncompensated transfer. The denial is official notification that the penalty period has commenced. The penalty period begins when three conditions are met:

1. a gift is made;
2. the resident  is in need of long term care services and;
3. He or she is determined to be “otherwise eligible” (the Medicaid application would have been approved except for the uncompensated transfer.) To be eligible for Medicaid, the resident’s resources must be no greater than $31,175 plus a $1500 burial account in 2024) and the monthly private pay cost of the nursing home must exceed his or her income. The number of months of ineligibility (the penalty period) is calculated by dividing the value of the gift by the average monthly cost of nursing home care at the “regional rate.”

STEP SIX: The monthly repayments under the note are used to pay for the cost of the nursing home during the penalty period.

STEP SEVEN: When the penalty period expires, the resident can file a second Medicaid application that should be approved.

How is NY emergency Medicaid planning with promissory notes done if the nursing home or assisted living resident is mentally incapacitated?

If the resident is mentally incapacitated, his or her guardian or power of attorney can authorize NY emergency Medicaid planning with promissory notes.

For a free Medicaid Planning consultation, with experienced NY Elder Law Attorney Robert Friedman call or text him at (585) 484-7432.

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