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What is the Value of a Promissory Note?

by Ira M. Leff, Esq.

May 12, 2009

Last October, I wrote about a case I have in Columbia County where my client holds a promissory note which was executed several years ago when notes were excluded resources. This client had gone off of Medicaid for a while after selling her rental property and gifting the proceeds. When she reapplied for benefits, DFCS took the position that the note put her over the resource limit even though we had provided two low appraisals from Georgia bankers. DFCS held that the appraisal suggesting the higher value was what they considered the note to be worth.

Medicaid Manual Section 2313-4 states that if both brokers provide a value for the note then DFCS is to count the higher offer as a resource. I appealed the denial and argued that an offer is different than an opinion as to value. In my case, both brokers opined as to value but neither offered to purchase the note.

In a well written Order, Judge Patrick Woodard of the Office of State Administrative Hearings, ruled that two independent and knowledgeable sources determined that the promissory note is not marketable based upon the lengthy repayment period, extremely low monthly payments and lack of security. Therefore, Judge Woodard concluded that the value of the note is $0.00, and he Ordered DFCS to reverse its decision.

Notwithstanding this victory, I would expect to see a retroactive amendment to Section 2313 in the near future. So, I would still advise you to count the higher of the two appraisals towards the resource limit.

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