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Shielding assets for Medicaid: The note and loan strategy

May 1, 2009
by Jennifer B. Cona, Esq.
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It is important to note that in order for the strategy to work, there must be a monthly shortfall in the amount paid to the facility each month. This is because the resident must have medical expenses greater than the Medicaid rate in order to be considered “otherwise eligible” for Medicaid benefits while also having medical expenses she or he is unable to meet in full. This shortfall needs to be made up at the end of the loan period from the gifted portion of the assets, and this can present a problem for the long-term care facility. However, if the facility and the family are working together (as they should, since they have a common goal), they may have a disclosure arrangement or escrow arrangement to address the monthly shortfall.

Details, details…

The strategy, albeit basic in concept, is very particular in the details. While facility staff cannot be charged with knowing the minutiae of such a note and loan strategy, it is important that admissions and business office personnel understand the general strategy and be able to identify whether a potential resident's plan meets all the criteria. In this way, an LTC facility can make an educated decision whether to admit the potential resident, and can work with the family to ensure that the plan is appropriately carried out to all parties' mutual benefit.

Jennifer B. Cona, Esq., is a partner with Genser Dubow Genser & Cona, LLP, an elder law firm located in Melville, Long Island. The firm provides a full range of elder law and healthcare facility representation services, including litigation, collections, Medicaid application processing and appeals, guardianships and discharge procedures. For further information, phone (631) 390-5000 or visit

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At a glance…

Medicaid applicants forced to spend-down remaining monies, thereby prohibiting last-minute asset transfers to families, should pursue an alternative planning strategy. A combination of a loan and promissory note can protect savings transactions from government penalty.

Long-Term Living 2009 May;58(5):36-37