The Challenge
Walter and Alice’s Challenge: Establishing Care Without Draining Their Assets
Walter and Alice found themselves in a common but difficult situation. They have diligently saved throughout their lives, accumulating assets that disqualify them from Nursing Home Medicaid. However, the cost of long-term care for Walter could quickly deplete their life savings, leaving Alice not only physically and emotionally taxed, but also financially vulnerable.
Our Solution
This situation is where our experience comes into play. Although the law has changed over the past 25 years we have been in practice, there’s still a solution: a Medicaid Compliant Promissory Note.
Here’s how it works:
- Asset Division: We help Alice and Walter put the assets to be protected in Alice’s name.
- The “Note” Process: Alice, as the community spouse, loans assets in excess of the countable resource limit to a third party (usually a family member) using a meticulously structured promissory note.
- Careful Structuring: The promissory note is structured to comply with federal Medicaid law. It must have a reasonable interest rate, be actuarially sound, and provide equal payments with no deferral or balloon payments.
- Medicaid Application: We then apply for Medicaid for Walter. We explain during the application interview process that Alice has converted otherwise countable assets into an income stream for herself.
- Repayment to Alice: The third party borrower repays Alice according to the note’s terms. These payments become Alice’s income, allowing her to maintain her quality of life.
The Outcome
By implementing this strategy we were able to provide protection and peace of mind:
- Walter qualified for Medicaid coverage, ensuring he will receive the care he needs.
- A significant portion of the couple’s assets is protected for Alice’s benefit.
- Alice can focus on supporting Walter emotionally without the added stress of potential financial ruin.
- The couple’s legacy for their children and other beneficiaries was preserved.
How We Can Help You
Every family’s situation is unique, and Medicaid planning can be complex. If you’re facing similar challenges, reach out to our experienced team. We’re here to help you protect everyone and everything you love.
