Rule 23-103-3.5 - Treatment of Loans, Promissory Notes and Property Agreements (Liberalized)A. For the borrower under both SSI and liberalized resource policy, if the agreement is bona fide and negotiable: 1. Cash paid by the lender to the borrower is not income;2. However, cash retained (or property received) may be a resource to the borrower the month following the month of receipt.B. Liberalized policy when individual is the seller or creditor:1. Obtain a copy of the agreemen and assume, absent evidence to the contrary, that the written agreement is bona fide and negotiable.2. Determine if the bona fide, negotiable note or agreement produces at least 6% net annual return of the principal balance.a) Loans, promissory notes and property agreements can be excluded as a resource if the note, loan or agreement produces at least a 6% net annual return of the principal balance.b) The income must be received by the client/spouse and counted as income in order for the exclusion to apply.c) If the above criteria are not met, the note or agreement cannot be excluded as a resource.C. Policy for institutionalized individuals in SSI or liberalized programs. 1. Even though the 6% rule is in effect and establishes a minimum acceptable payment when compared to the principal balance, the following conditions must also be met for a resource exclusion for all institutionalized individuals in either SSI or Liberalized programs: a) The repayment terms of the agreement must be actuarially sound;b) The payments must be of uniform rate, principal and interest, during the term of the agreement, with no deferred or balloon payments; andc) The agreement must prohibit cancellation of the debt upon the death of the lender.d) The institutional client or spouse must reasonably expect to receive full payoff of the note or loan during his/her lifetime. As with annuities, the average number of years of life expectancy remaining based on the Annuity Life Expectancy Charts must coincide with the payout of the promissory note or loan.D. Agreements which do not meet requirements. 1. For non-institutional cases assessed under liberalized resource policy, a non-bona fide or non-negotiable agreement is not a resource. Principal and interest payments are income to the seller/creditor. The goods or money represented in the agreement may be a resource if the seller/creditor has access for his own use.2. For institutional cases, funds used to purchase promissory notes, loans or mortgages that do not meet the 6% rule, are not actuarially sound or are not bona fide or negotiable will be considered a transfer of assets valued as the entire outstanding balance due as of the date of the application for long term care for contracts dated on or after February 8, 2006.23 Miss. Code. R. 103-3.5
Social Security Act §1902 (r) (2); 42 CFR §435.601(b) (Rev 1994).