Half Loaf Planning refers to a special Medicaid planning technique for single persons only. The attorneys at Ansari Firm start by sitting down with the family and determining all assets and, usually, we will end up consolidating them. Then, the attorney will discuss with the family and spend-down items; such as, pre-paid funeral contract, home improvements, hearing aids, personal items, etc. The money can be spent down on any items for the person in the nursing home. Gifts are not allowed. The key here is to spend-down on things that you will have to eventually pay for anyways. You do not want to spend money just to spend the money. It is not necessary.

Once it is determined if there is a need to spend-down any assets, the attorney will come up with the amount of assets that will go into the half loaf plan. The half loaf plan is a very case specific, mathematical calculation that gifts away a portion of the assets, which will create a penalty period in which medicaid will not pay for the nursing home stay. The other part of the equation is to retain the correct amount of assets and loan, not gift, them away so that the loaned assets can pay the nursing home bill over the penalty period. Now, we know that was a lot to digest, how about a case study?

Mom is single and 84 years old. She was living on her own until she recently had a fall. She went into the hospital, was admitted for 3 days, and then was transferred to a nursing home to do rehab. She did rehab for 3 weeks when the family was told she had “plateaued” and she would be discharged within the next few days. The family then decided that Mom was not safe to come home and live on her own anymore, so they notified the nursing home that Mom would be staying there long-term.

Now that we know Mom will have to stay in the nursing home long-term, they come into Ansari Firm. We determine that Mom has a house and $70,000 in the bank. First, we need to talk about any spend-down items. Is there anything in the home that needs to be done in order to eventually sell? Does Mom has a pre-paid funeral contract? We factor any of these in off the top of the plan. Lets assume we did not need to do any spend-down. Here is the half loaf plan:

We gift approximately $35,000 away. By away, I mean into someone else’s name, usually a child. This gift will trigger a penalty period ($35,000/$8,469) of 4 months. The other $35,000 if loaned away, usually to a child. The child then signs a Medicaid compliant promissory note. This note says that this amount was not a gift and the child will then pay back Mom over the 4 month penalty period and Mom will then use that money to pay the nursing home. At the end of the 4 months, the loan is repaid, and the penalty period is over and Mom then goes onto Medicaid. This illustration is at its simplest form. The individuals exact monthly income and the nursing home’s actually monthly cost also has to be factored in.