missed the 5-year look-back for Medicaid?

 If you missed the 5-year look-back period for Medicaid, take a look at possibly using the 'half-a loaf" strategy!

The gift + promissory note (“half-a-loaf”) strategy is a Medicaid crisis-planning approach used when someone already needs nursing home care but still has assets. A portion of assets is gifted to a child, which creates a Medicaid penalty period, while the remaining portion is converted into a promissory note that pays the parent back over time. Those payments are used to cover care costs during the penalty period, after which Medicaid eligibility can begin. The goal is to preserve part of the estate instead of fully spending it down.

It’s often overlooked because it feels counterintuitive—giving assets away while also structuring a “loan back”—and because it only works when carefully aligned with Medicaid rules, timing, and proper documentation. If structured incorrectly, it can create penalties without actually solving the cash-flow problem.

Example (cash case): Parent has $100,000. She gifts $50,000 to her child (creating a Medicaid penalty period) and places $50,000 into a promissory note. The note pays monthly amounts to cover nursing home costs during the penalty period, and Medicaid begins after the penalty ends, while the $50,000 gift is preserved.

Example (home sale): Parent owns a house worth $200,000. In crisis, the child buys the home for $200,000 at fair market value. The parent then uses a portion of the proceeds in a promissory note structure (or similar planning tool depending on state rules) to generate income during the Medicaid penalty period, while the remainder is gifted to the child to preserve value. Proper structuring is critical so the sale is at fair market value and does not create unintended Medicaid penalties or tax issues.

If you’re in crisis mode: Act quickly and consult an experienced elder-law attorney. Even when someone is already in a nursing home, it may still be possible to structure a note-based plan that bridges the penalty period and preserves part of the estate—but timing and proper drafting are essential to avoid losing the benefit entirely.