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Using the Gift and Loan to Get Medicaid

Even when someone is about to enter the nursing home, it is still possible to preserve a half of their assets while qualifying for Medicaid. One of the last resort tactics we use is the gift and loan technique known as “half and half.”

Here is an example of how it works:

Paula, who has $200,000 in assets, needs to go into a nursing home. She gifts half of it to her daugher and lends her the other half. Medicaid applies a penalty waiting period on the half that she’s gifted, but not on the half that’s a loan. So Paula, who transferred $100,000 to her daugter, will incur a 10 month period during which she will not be able to receive Medicaid and will use the $10,000 per month loan repayments from her daughter to pay for nursing home care. After the penalty period, Paula starts getting Medicaid while her daughter legally keeps $100,000.

It is important to document the loan with a properly executed promissory note with the applicable interest; otherwise New York will not consider it to be a loan. The Promissory Note will need to be presented during the application process to prove that the transfer was not a gift but a loan. Read more about how a Note Payable can be used to qualify for Medicaid.

It is also important to get an opinion letter from an attorney advising of the legality of any particular medicaid transfer technique. It would be unwise to attempt this advanced technique without the assistance and support of qualified legal counsel.