The following questions directly address the bona fide nature of the informal loan, repayment of the promissory note and prohibiting cancellation of the balance upon the death of the lender, which has been stated are requisites for the use of promissory notes. Also, as stated, 42 C.F.R §435.907 (e) is titled “Limits on information.” Title 42 C.F.R. §435.907 (e)(1) states “[t]he agency may only require an applicant to provide the information necessary to make an eligibility determination.” As demonstrated above, DHS has the right to request the aforementioned information to determine if the promissory note is bona fide or not. Refusal to provide such information may result in denial of the application for eligibility/benefits. See OAC 317:35-5-64(a).
For an example of a Promissory Note, refer to article LTC: Promissory Note Example.
Questions to Ask and Information to Gather:
- What is the date?
- What is the borrower’s name/attorney-in-fact for applicant?
- What resource was transferred?
- Who was the resource transferred to? (Name and relationship)
- How much was it exchanged for?
Additional Questions to Ask
Promissory Note. Pertaining to the client’s pending application for eligibility, please respond to the following;
- 1. Is or has [APPLICANT] been in the business of lending money or selling real or personal property? If yes, please provide supporting documents.
- See POMS SI §1120.220(D) – Requirements for a Bona Fide Informal Loan – not in the business of lending money or providing credit.
- 2. Did [BORROWER] offer [APPLICANT/RELATIONSHIP] collateral in exchange for the [WHAT RESOURCES?] received? If yes, please provide details and supporting documents.
- See POMS SI §1120.220(D)(5) – Requirements for a Bona Fide Informal Loan – repayment plan must be feasible.
- 3. What did [BORROWER] do with the [WHAT RESOURCES] received from [APPLICANT/RELATIONSHIP]? If transferred to a Trust, LLC or similar device, please provide supporting documents.
- See POM SI §1120.220(D)(5) – Requirements for a Bona Fide Informal Loan – repayment plan must be feasible. If the payments were not feasible/made, then the [RESOURCES] received in exchange for the promissory note would need to be returned to [APPLICANT]/Estate of [APPLICANT] (See 42 U.S.C. §1396p(C)(1)(1)(iii).
- 4. Has the [HOW MUCH?] Promissory Note (or the obligation for repayment/payments under the promissory note) been transferred to a Trust or similar device? If yes, please provide details and supporting documents.
- See – 42 U.S.C. §1396p(c)(1)(1)(iii).
- 5. Has there been a pattern of lending and repayment between [APPLICANT] and [BORROWER]? If yes, please provide details and supporting documents.
- See POMS SI §1120.220 (D) – Requirements for a Bona Fide Informal Loan – not in the business of lending money or providing credit.
We request that the responsive answers and information be provided within ten (10 days of the date of the date of this email. Please advise if you have any questions.