21st Century Promissory Notes
by Ira M. Leff, Esq.
February 23, 2010
For many years, Elder Law Attorneys in Georgia used promissory notes as a simple way to convert countable assets into exempt resources. Unfortunately, these rules changed effective October 1, 2006. Under the revised rules, notes are either going to count as resources, or will be treated as transfers.
However, there is one notable exception to this rule. An unsecured note that is: actuarially sound; paid in equal monthly amounts with no prepayment option; and is not cancelable on the death of the lender, is neither a resource nor a transfer. The payments, however, are treated as income to the recipient. MEDICAID MANUAL § 2313. In effect, these rules describe a private annuity which is an alternative to using an insurance company to convert excess assets into income.
APPLICATION 1: Charlie and Donna have combined assets of $250,000. Charlie's monthly income is $2,500 and Donna's is $1,750. Donna has entered a nursing home and would like Medicaid assistance with the cost. Charlie could loan $150,000 to their children. The payments that he receives would count as income to him which would reduce or eliminate his spousal needs allowance since his income,including the loan payments, is over $2,739 per month. Donna qualifies for immediate Medicaid benefits since their combined resources are now under $111,560. She pays no more than $1,750 per month for her care.
APPLICATION 2: Barbara is a widow with two adult children. She was just admitted to a nursing home. She wants to give her children her excess assets ($100,000) but wants to make sure that they support her during the penalty period. So she gives the children $50,000 and loans them $50,000. Barbara uses the loan payments to pay the nursing home during the penalty period.
Please click on any of the categories below to read more related Elder Law Minutes.
If you would like to join my mailing list, please click here.
Elder Law Minute is written and distributed by Ira M. Leff and Associates. The information contained therein may not be altered, appropriated, duplicated or transmitted without the express permission of Ira M. Leff. Information contained in this website is general in nature and not intended as legal advice. Visiting this website does not create an attorney-client relationship. Legal advice should be obtained before any action is taken based upon information in this website. Sending an inquiry to our firm does not constitute engagement of our services nor does it establish an attorney-client relationship.
Copyright © 2008–2013 Ira M. Leff, Attorney at Law. All rights reserved.
1722 Pinetree Circle / Atlanta, Georgia 30329 /
Direct dial: 404.633.1801 / Fax: 404.633.1830
info@IraLeff.com
Website design by
Click Design
. Website Maintenance by
NFI Atlanta.
If you have any questions or issues regarding this website please contact
webmaster@iraleff.com