1040.015.00 Definition of Terms

1040.015.10.05 Consideration of Certain Contracts

IM-82 May 20, 2019

Certain types of contracts the participant is a party to may affect the eligibility determination for MO HealthNet in relation to income, resources, and transfer of property requirements.  For purposes of determining MO HealthNet eligibility, contracts the participant is a party to must be reviewed and may be identified as being a Promise to Pay, a Promissory Note, or a Property Agreement.

Definitions and Steps to Follow When Reviewing Contracts


  • Loan – A loan is a transaction whereby one party advances money to, or on behalf of another party, who promises to repay the lender in full, with or without interest. The loan agreement may be written or oral, and must be enforceable under State law.
  • Negotiable Agreement – A negotiable agreement is (e.g., a loan) where the owner of the agreement itself can transfer or sell it from one person to another. If the agreement says that the original owner cannot give or sell it to anyone else, it is “non-negotiable”.  For example; this would be an agreement that says “I will pay Bob, and only Bob, $20 on May 1st”. 

NOTE:  If there is no legal restriction against converting the contract into cash, or against selling it, the promissory note is considered negotiable.  Assume, absent evidence to the contrary, the written agreement is negotiable, and may be sold. 

  • Non-negotiable Agreement – A non-negotiable agreement cannot be sold, transferred, or assigned to any other person or entity. The agreement will include terms such as non-assignable and non-transferrable.  If the note does not include these terms, or a statement it cannot be transferred or sold, assume it is negotiable.
  • Informal Loan – A loan made between two individuals who are not in the business of making loans, lending money, or providing credit.
  • Bona Fide Agreement – A bona fide agreement is an agreement that meets ALL of the following:
    • legally valid under the applicable State’s law
    • enforceable under State Law
    • made in good faith
    • effective at the time of the transaction
    • contains acknowledgement from all parties of the obligation to repay
    • does not offer any form of forgiveness
    • includes a plan for repayment with or without interest

Obtain a complete copy of the finalized agreement. If it is a verbal agreement between the lender and borrower, obtain a written attestation verifying the transaction.  If it is a bona fide agreement, at least one party will have performed his/her end of the contract.

NOTE:  If the “Agreement” does not meet the requirements above to be considered bona fide, its value is zero and a transfer of property may have occurred.  If the note involves cash, it must meet the safe harbor requirements in IM Manual Section 1040.020.30 Determining Fair and Valuable Consideration.

Determine if it is a Promise to Pay, a Promissory Note, or a Property Agreement.

Review the agreement for the following information:

  • Is it a Bona Fide Agreement or Non–Bona Fide?
  • Is the agreement Negotiable or Non-negotiable?
  • What transaction has taken place?
  • What party is the participant in the agreement?
  • What other parties are identified?
  • Was the agreement created with funds?
  • Was the agreement created with property?
  • Was the agreement created as a promise to be repaid with certain assets owned but not yet available?
  • Is it assignable/transferrable – can it be sold?

Determine the resource value of the agreement by following the resource determination found in the next sections depending on the type of agreement.   If the outstanding principal balance combined with other resources cause ineligibility, inform the participant of the resource value that will be used.  If information is provided from a knowledgeable source verifying a lower value, the lower value should be used. 

Knowledgeable sources include anyone in the business of making estimates such as banks, other financial institutions, private investors, real estate brokers, or can be an offer made in good faith to purchase the agreement.