A Promissory Note is a strategy utilized when a single person has entered a nursing home and has too many resources to qualify for Medicaid.  This type of planning allows us to preserve between 40-50% of the individual’s assets and subsequently qualify for Medicaid.

This is a complicated planning technique, so the best way to illustrate how it works is by general example. (Please note that this is simplified for illustration purposes and many factors, including the applicant’s income and the nursing home’s private pay rate are factored into the complex calculation.)


George is single, lives in Suffolk County and just entered a nursing home.  He has $325,000 and therefore, does not qualify for Medicaid.

Since George is only allowed to keep $14,850 in resources, he has excess resources of $310,150 in his name.  If George gives that money away and then applied for Medicaid, it would create a very long Medicaid ineligibility period.  During this ineligibility period, he will be expected to privately pay for the nursing home.  Thus, he will have to use all of the money that he gifted, if it can be returned, to pay for his care.

A more viable planning option would be for George to gift a portion of his money away, approximately $130,263 to his children, leaving a balance of $179,887.  This gift to his children creates a Medicaid penalty period of 10.5 months. (A penalty period is calculated using the total gift divided by the average monthly cost of a nursing home in the region in which George resides. In 2015, the Long Island regional rate is $12,390.)  During the 10.5 month penalty, George must privately pay for his nursing home care.

In order to get the 10.5 month Medicaid penalty started, the $179,887 remaining in George’s name is loaned to his children and is repaid to him in ten monthly installments (the course of his penalty period), in an amount that is slightly below the private cost of his nursing home care (to be financially eligible for Medicaid, a person’s medical expenses must exceed their monthly income, so George’s income and the loan repayment must be less than the private cost of the nursing home).

Thus, once the 10.5 months has passed, George’s care will then be covered by Medicaid and will have preserved a portion of his assets for his children.