When the need for long-term care arises, the high costs can quickly drain a family’s savings. Fortunately, Medicaid rules allow certain planning strategies to help protect assets. One option is the use of a Medicaid-compliant promissory note.

A promissory note is simply a written promise to repay money over time. To qualify as “Medicaid-compliant,” the note must follow strict requirements: it must be irrevocable, non-assignable, have equal monthly payments, and include no balloon payments.

When structured properly, this tool allows an individual to convert excess assets into an income stream without disqualifying them from Medicaid eligibility.

This planning technique can be especially helpful for married couples or families hoping to preserve resources for a spouse or beneficiaries.