Promissory Notes Are Back!

August 01, 2017 by John Zabkowicz

Attorney Terry Campbell signified the importance of Medicaid annuities in our blog a few weeks back.  In order to preserve assets, a couple or a single person could purchase a Medicaid annuity and essentially become qualified for Medicaid benefits.  This specific and complicated Medicaid annuity was really one of the only ways to preserve assets in the State of Wisconsin for the past couple of years, because promissory notes were invalidated by the Wisconsin Department of Health Services in 2015.

Not anymore.  On July 21, 2017, the federal Centers for Medicare and Medicaid Services (CMS) informed the Department of Health Services that their invalidation of promissory notes under the 2015 Wisconsin Act 55 was contrary to federal law and the Department must update their policy immediately.  Accordingly, effective August 1, 2017, the Wisconsin Department of Health Services terminated this policy in order to comply with federal law.

How does this work?  Medicaid applicants can now use promissory notes to convert countable resources, such as assets in a checking or savings account, into unavailable assets, thus assisting the applicant to become available for Medicaid.  For example, let’s say the applicant is married and they (the couple) have around $300,000 in countable assets.  In order to become qualified for Medicaid benefits, the couple needs to be under $120,000 in countable assets by the end of the month.  The applicant (or their spouse) loans a sum of money (in this case, around $180,000) to a relative or another person in exchange for a promissory note.  The note is an unconditional agreement to pay back the applicant (or the spouse) over a specified period of time.  As long as the note meets certain requirements, the applicant can quickly become qualified for Medicaid services, and the spouse will be able to keep all of the payments from the note.

If you, your spouse or someone you know is in need of nursing home or assisted living care, please let them know of this updated policy.  Moertl, Wilkins & Campbell, S.C. can assist with long term care planning.

Attorney John P. Zabkowicz