Law News and Tips
Fred L. Vilbig © 2019
Many years ago the firm I was with was approached by a Chicago law firm about merging. I admit the managing partner of the firm (I’ll call him Joe) at a wedding in my wife’s hometown. He seemed nice enough, but pretty intense.
The next week he called me. We started the process of investigating a possible merger. This is called “due diligence.” There were meetings between the partners, financial records review, and overall philosophies to consider and compare. It takes a lot of time and effort to think through something like that. You don’t want to make a mistake since undoing a merger is even worse than doing one.
We were almost done with all of that due diligence at the beginning of summer. Joe told us that we would need to take a short pause because his partners were making him take a vacation. Evidently, he hadn’t taken a vacation in years, and his partners were concerned about the amount of stress in his life. He and his family were going to Florida. He said he’d be in touch when he got back.
I was expecting a call after about two weeks. Nothing. Three weeks went by, and there was still nothing. Soon a month had passed, and still nothing. Finally, I called to see what was going on. I got his secretary, and in a very somber tone, she said that she would have someone call me back.
A day or so later I got a call from one of Joe’s partners. He told me that while sitting on the beach on vacation, Joe had suffered a massive heart attack and had died. We were stunned, to say the least. Evidently, the stress of taking a vacation had been too much for him and his heart.
Vacation season is one of those times of the year when people need to think about estate planning. If parents with small children are traveling alone, they need to make sure that everything is in order. When kids go on vacations alone or study abroad for the summer, they at least need to have a power of attorney - to handle financial matters when they are out of town or unconscious - and a medical directive - so someone can make medical decisions when they can't.
There is an old saying - "An ounce of precaution is worth a pound of cure." So a little planning can go a long way. Give me a call.
Without a plan in place things fall apart.
Fred L. Vilbig © 2019
Life is short. The older I get, the more evident that becomes. When I was young, 30 seemed so old; 60 seemed like forever away and 70 was an eternity, and 80 or 90 was just incomprehensible nonsense. And then suddenly, it’s here. We don’t necessarily feel that old. In fact, in our heads, we’re still 25 or 30, but the mirror tells us something entirely different. How can all of that happen?
And when you start to think about the brevity of life, you can start to think about what your life has meant. We take ourselves entirely too seriously (and probably rightfully so) to just see ourselves as some passing mist – here today and gone and forgotten tomorrow. Many people start to think about their legacy – when we’re gone, how will people remember us?
That was brought home to me recently when working with some business owners. They had spent most of their adult years nurturing and growing a business, and now time was catching up. They wanted to plan what to do carefully so there wasn’t a train wreck when they died, but they were having trouble letting go. This is very common.
One of the business owners had a child involved in the business and two others who weren’t. He really wanted things to end harmoniously for the family as a whole, protect the son in the business because of the grandchildren, and also protect the employees, some of whom had been with him for years. It was sort of complex calculus.
Another business owner didn’t have any family active in the business, but the business was the principal asset of his estate. The most likely successors to his business were some key employees. So he wanted to plan a fair transition that protected employees while also providing an inheritance for his family.
Although there may be similarities in different business plans like this, I have found that subtle differences in focuses can have major impacts on the resulting plan. The dynamic relations between family members can result in vastly varying solutions. The complex politics of a business can require a carefully finessed plan that makes individuals feel valued without undermining the operation of the business. And then there’s the question of getting it all financed.
And I’ve seen many times where business owners just run out of time. Once a fifty-year-old trial attorney I knew dropped dead on the beach because he was so stressed out about his partners forcing him to take a vacation. Several times we have had healthy people simply go to sleep never again to wake up. And without a plan in place (sure they had thought about it), things fell apart: the business was sold to outsiders at a discount and the surviving family got shortchanged.
So what is your legacy? Will you be soon forgotten for lack of a plan, or will you be fondly remembered through the continuation of the business you have (almost miraculously) grown into a success? I’d love to have a chance to talk with you about this.
Fred L. Vilbig © 2018
One of my sons texted me the other day. He needs money. Not the way you’re thinking. He’s getting into the real estate business – multifamily units. He was renting an apartment but got tired of that, so he bought a 4-family, lives in one unit, and rents the other three. I wish I would’ve been that smart.
He’s going into business with one of his grade school buddies to buy more properties. But they want to get bigger properties. The problem is that that requires more money than the two of them have.
That seems to be a perennial problem for businesses – money. It happens all the time where a business needs to buy more equipment or expand facilities in order to grow and make more money. But the question is how.
Owners can borrow money, but banks can be stingy. They don’t like lending money when there’s a chance they won’t get it back. It has to be a pretty certain business opportunity for them to lend a bunch of money. Just to make sure, they will usually put some kind of a lien against the assets, and they’ll impose a bunch of financial covenants or promises on the business. Those covenants can be kind of a pain, but it is their money that they are lending you.
Instead of a bank loan, business owners can go to friends and family to get private loans. Those can get messy. It’s important to have a clear understanding about what’s going on. If things go well, your “lender” will want to treat it as an investment so that they get to share in the growth of the business. If things go badly, your “investor” will want to be treated as a lender so they can get paid back before the shareholders. And the understanding needs to be in writing – people are funny about remembering things the way they want to.
My son knew that he wanted to sell interests in the business. He also knew that this would raise securities law issues. He thought that meant he had to register with the federal Securities and Exchange Commission. That is a horrendous effort, so you try to avoid it at all costs… that is, short of prison. So small business owners need to fit into a federal exemption.
Generally, small (under $5 million with less than 35 investors) or purely intrastate security sales are exempted, though the devil is in the details. If you have investors in more than one state, you’ll probably need to file a Reg. D registration which is a simplified (although not simple) process. But even if you have all of your investors in one state (and intrastate offering), you may still be subject to that state’s securities law, so you need to look for a state exemption. In Missouri, you’re pretty safe if you have fewer than 25 investors.
But even if you’re exempt from state registration, you probably still are subject to the disclosure requirements. If you’re offering securities to people who will not be directly involved in the business, you cannot make a material misstatement (that is, tell a lie) and you cannot fail to disclose some material information about the business. And again, this kind of disclosure needs to be in writing because of that memory issue I mentioned earlier.
If you’re thinking about raising money to expand your business, give us a call. It’s important to everyone to get it right.
THE GREAT TRANSITION
Fred L. Vilbig © 2018
As I’ve said before, everyone is predicting that over the next decade or so, we are going to see the largest business transition in history. The aging baby boomers are either voluntarily or involuntarily going to pass their businesses on to the younger generation. It is important to plan. As I mentioned in my last column, my grandfather (God bless him) didn’t.
Although early in this process we thought that mom and dad would be giving their businesses to their kids, it looks like that is not the case. Many of the business owners put little away for retirement. Their businesses are their retirement savings. They can’t put that in jeopardy.
But why not sell the business to the kids? Many times the kids aren’t interested. Other times, the kids wouldn’t be a good fit for one reason or another. Quite often, the kids can’t get a loan, even an SBA loan, or they don’t want to personally guarantee a loan, putting everything they own at risk. What we are seeing more and more is sales to insiders or sales to outside third-parties. We recently closed on the sale of an asphalt company for these very reasons.
When we represent a buyer, we always suggest that the transaction be structured as a purchase of the company assets. The reason for that is that the buyer doesn’t want the seller’s liabilities. For instance, in preparation for the sale, the seller may have recently fired some employees without getting adequate releases. Or maybe there are pending income or employment tax issues. Maybe they’re unsatisfied liens. A buyer doesn’t want any of that baggage, so they buy the assets but leave the liabilities.
The problem is that liabilities can be pesky-particularly in product liability and environmental cases. The courts have decided that if you are buying an entire business and plan to continue it (even using the old name), then the buyer should be liable for some, if not all, of those liabilities. It’s very annoying.
That’s where “due diligence” comes in. In a well written purchase agreement, the seller will give the buyer lots of warranties and representations regarding all kinds of things. It would be nice if we could trust people, but we can’t. As President Reagan once said, “Trust, but verify.” That is due diligence.
For the buyer, due diligence takes many forms depending on the particular assets. If there is real estate, you’ll want title insurance. If you are buying things (like equipment or vehicles), you need to make sure there are no liens for loans. You’ll want to make sure there are no tax liens or outstanding judgments. And you’ll want the seller’s lawyer to certify the existence and authority of the seller. Buyers may not want to take the time or pay the money to do these investigations, but you ignore them at your peril. It’s sad when a buyer thinks he or she has purchased a golden nugget only to find out that they have iron pyrite (that is, fool’s gold).
So if you are in the market to buy your own business, caveat emptor, that is “Buyer beware.” The old saying applies: an ounce of prevention is worth a pound of cure. Sometimes that cure can be terribly expensive.
Call if you have any questions.
THE FAMILY BUSINESS
Fred L. Vilbig (c) 2018
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My great-great-grandfather came from Bavaria in 1860. After some conflicts between his farming and the Missouri River, he moved in about
1876 to Dallas where there wasn’t as much water. He found that pecan trees grew in sandy soil, so he bought some land with pecan trees. He dug up the
sand and gravel and took it into town. Dallas at the time was a growing city with lots of building, so they needed lots of sand and gravel. The streets
of downtown Dallas have a layer of asphalt over cobblestone that was laid on Vilbig Brothers sand and gravel. Our roots are deep.
The family business survived to the third-generation. That’s kind of remarkable. Most family businesses don’t survive the second generation. It even survived a family feud.
Over time the business changed. They were good at digging up sand and gravel, so they moved into excavation work digging basements for many of the major buildings in downtown Dallas. From there they moved into building dams and doing the dirt-work for roads. When I was a teenager, I drove dump trucks, bulldozers, and scrapers. I wasn’t very good at all that, so I went to law school.
When my grandfather died in 1976, my brother wanted to take over the business. He had a civil engineering degree and had worked in the company for a few years. The problem was that there was no plan in place. I know my grandfather had an attorney (Bill Burrows) he worked with a lot. He’d often complained that Bill was making him do something. But evidently no succession plan was in place.
My grandmother survived my grandfather. Although I remember my grandfather as being successful (although he never did get us that pony he always promised us), I know it wasn’t always easy. My grandmother would remind us that in business, “Some years you eat the chicken, and some years you eat the feathers.”
I don’t know if my grandmother ever really liked the construction company. After my grandfather died, instead of working something out with my brother, she decided to just sell the equipment and close the business. She told my brother he should start from scratch just like my grandfather did. That wasn’t true. After the family feud, my great-grandfather bought to surplus WWI Army dump trucks to restart the business, and that’s what my grandfather had when he got started.
The problem with my grandmother’s strategy was that she wasted perhaps the most valuable company asset. Sure the dump trucks, bulldozers, and scrapers were worth something, but they were all used and beat up. The biggest asset of the company was the name and the 100 years of goodwill in the community. She got nothing for that. It just evaporated.
I don’t know why my grandfather didn’t have a succession plan or why my grandmother just liquidated a 100-year-old family business. I’ll never know. It’s just sad.
If you have a family business, you need to give some thought to what happens if you become incompetent or die. Is there a child involved? If not, are there key employees who could buy the business? There needs to be some sort of a plan. Otherwise, a lot of hard work and good will can just evaporate. And like I said, that’s just sad.
Let’s get together if you want to talk about your options.
Fred L. Vilbig © 2017
I once had a client whose business consisted of a list of licensed medical professionals. Hospitals and other medical facilities were in chronic need of these professional, but they were unable to hire enough of them. The professionals in question usually did not want to be full-time employees; rather, they just wanted to work part-time. My client identified healthcare facilities that needed these professionals and then let the professionals know of the opportunities.
This was actually a lot of work. The owner was constantly meeting with different facilities and working out the details and then recruiting professionals to fill the jobs. She wanted to get paid for her work. The healthcare facilities wanted to cut costs by getting around my client, so we had all the professionals sign agreements saying that they agreed not to take a job at one of these healthcare facilities. This kind of an agreement is often referred to as a “non-compete”.
Simply stated, a non-compete agreement prohibits a former employee from competing against a former employer. Courts don’t necessarily like this kind of thing. It’s kind of un-American to keep someone from working. However, courts realize that businesses have the right to reasonably protect real business interests. If a company invests in an employee by training him or her to do a job or provide them with the names of customers who have been discovered through hard work, courts will protect these kinds of business interests. However, a non-compete restriction is not unlimited.
These restrictions need to be reasonable as to time and distance. If a business’ legitimate market is only in Chesterfield, a court will not enforce a non-compete against a former employee setting up shop in Columbia, Missouri. And if a company’s customer list completely changes every two years, the court is not going to enforce a 10 year non-compete. Still, depending on the circumstances, non-competes can be an effective way to protect business interests.
A related but separate agreement is a non-solicitation agreement. You commonly see these in conjunction with non-competes. There are two aspects of a non-solicitation agreement: customers and employees. The former employer clearly wants to prevent a former employee from stealing his or her customers. However, in addition, employers also want to stop ex-employees from stealing other employees. A non-solicitation agreement helps with that. Courts appear to be more willing to enforce these kinds of provisions than non-competes.
Anyone in business will tell you that it is tough. It can take years to develop your product or service. And once you have your product, you need good employees to help your business grow and prosper. And finally, you need a customer base. All of these things take a long time and a lot of hard work to develop. Business owners need to protect them all. That’s where non-competes and non-solicitation agreements come in. Important things to have.
Fred L. Vilbig © 2017
Sometimes my clients just get too emotional! What do I mean? Read on.
In my last column, I wrote about some of the general issues involved in selling your business as a part of your retirement plan: who are your buyers; how do you value your business; and how is the sale financed? These are all kind of objective questions that can be very deliberately considered. But many times, they’re not.
Where I run into problems with clients is when they are overly anxious or excited. They let their emotions get the better of them.For instance, when buying a business, you need to be careful to make sure that you are actually buying what you think you are buying, nothing more and nothing less.This is called “due diligence.”
A good example of this would be real estate. Property titles are transferred though deeds that need to be recorded to be effective.You and I think about land in terms of property addresses.However, real estate is conveyed using legal descriptions.The legal descriptions can be lots in subdivisions or what are called “metes and bounds” descriptions – that’s the kind of thing that says “143.3 feet SSW from the old iron rod in the middle of Min Street.”Out in the country, you might have a legal description that reads like “the NW ¼ of the SW ½ of Section 1, Township 35, Range 13.”If you can tell me where that property is, you are much better at real estate than I am.
Real estate also brings with it other questions. How do you know what the environmental status of the property is? Do you really know that the seller owns the property? Are there any mortgages or liens on the property? Are the buildings in good condition or are the problems just patched up? And if there are buildings, do you know if they are built to code?
With regard to vehicles and equipment, you have similar questions. How do you know the condition or whether there are liens against them? You need to ask for maintenance records, and if there aren’t any, you need a thorough inspection.
The business may have a lot of “good will.” This basically means it is not asset heavy but still has a good cash flow. A law practice or an accounting firm is a good example of this. In that case, you have to rely on financial statements. Do you know if they are compiled, reviewed, or audited, and do you know the difference?And even if the financials are reliable, can you understand them?People go to college to learn how to read them.
On the Seller’s side, there is a different set of concerns. Sellers basically want to get their money and get out of town (sometimes literally). But buyers want all kinds of proof regarding the assets they are buying.The seller will probably have to dig into his or her records to prove all kinds of things.The problem with this is that you will be disclosing all of the warts of your business (and all businesses have warts). You need to make sure that the buyer has to keep that private and that they can’t use that information against you if the deal falls through.You need to get a non-disclosure agreement (commonly referred to as an “NDA”) from the potential buyer even before you start sharing information.
As I mentioned in the last column, one of the biggest problems a seller may have to face is where the buyer can’t come up with financing. If a bank is unwilling to make a loan for the entire amount or the buyer can’t get a loan at all, the seller may have to finance some or all of the purchase price. The first question is whether the buyer is credit-worthy. IF you trust the buyer, how do you make sure you will continue to deal with him or her? Is the obligation assignable? You could end up having to rely on someone you don’t even know. Even if the contract is not assignable, what happens if the current buyer sells his or her business, so again you are stuck with someone you don’t even know.
Then there’s the question of how to secure the loan.This is like the mortgage on your home. No bank is going to lend you money without having something backing up your promise to repay. You shouldn’t either.
But like I said, clients can be the worst. They get blinded by the opportunity – whether it’s the business itself or the prospect of getting bought out – and they throw caution to the wind. As I’ve mentioned before, a client’s business is often his or her retirement fund. Clients need to be very careful to protect themselves. If something seems too good to be true, it probably is. It is hard to keep emotions in check, but an emotional sale is a bad sale.
Caveat emptor! But also, Caveat venditor!
SELLING THE BUSINESS
Fred L. Vilbig © 2017
I grew up in Dallas, Texas, where my grandfather owned a construction company. It was 100 years old. He had inherited it from his father, who had inherited it from his father. A family business surviving through three generations is not unheard of, it is extremely rare. Then along came my grandmother.
When my grandfather died in 1976, his business was worth the current equivalent of almost $5 million. My grandmother could have sold the business to the highest bidder, either in a stock sale or an asset sale. However, for all of her wonderful qualities, she was not a businesswoman. She simply liquidated the assets. She sold the bulldozers, the scrapers, the maintainers, and all of the other hard assets, basically taking pennies on the dollar. She let the name and all of that built up goodwill just evaporate. I don’t know exactly what was lost, but I would estimate that it could have been as much as 75% of the value of the business.
For many business owners, this would be an unimaginable tragedy. Since owners typically pump every available resource into their businesses, they do not have a substantial 401(k) or SEP or any other kind of retirement savings. Their business is their retirement. However, that may be a problem.
Over the next 10 to 15 years, it is estimated that over 12 million privately owned businesses will change hands because they are owned by baby boomers. Some analysts are concerned that so many businesses for sale at one time may flood the market and depress values – good for buyers, but bad for sellers. Careful business planning is critical, but so many times, business owners are too busy to plan. That is a mistake.
In planning to sell a business, there are a number of factors that need to be considered. First and foremost, who are your potential buyers? Sometimes inside sales can net more because the buyers are familiar with the business. Is there a family member in the business? If not, is there one or several key employees who might be interested in buying the business?
If there is a possible inside buyer, how will they pay for it? Do they have cash? Typically, they do not. Can they get a loan? Does SBA financing work for them? Is the owner willing to take back some or all of the purchase price?
If the inside sale doesn’t work, how do you find good third-party buyers? There may be competitors lurking around waiting to snatch up your business in order to gain a larger market share. Or, there may be individuals who are just interested in owning their own business. Trying to identify them can be a challenge. Sometimes it is best to talk to business brokers, but how do you select the best broker for your type of business?
And then there is the question of valuation. Businesses can be valued on hard assets and/or cash flows. Some businesses can have what is called a “strategic value” to a particular buyer (for instance, a competitor who is trying to gain market share) which may be more than the strict appraised value. In any event, business owners need to be realistic in setting a price for their businesses. Many times owners overvalue their businesses. If the owner is working with a broker, the broker can help to set the value. If it is an inside sale to a family member or to one or more key employees, then the company accountant may be able to help establish a value.
In any event, the sale of the business will have a huge impact on the business owner and his or her family. As I said, careful consideration needs to be given to all these factors. Otherwise, you could end up with a liquidation and the loss of years of hard work, like my family, and that is not a good thing.
Thinking of selling your business? Want to plan for your future?
Contact Fred now about your situation.
The first consultation is free. Or call him now at (314) 241-3963
Check out Fred's other BLOG post on business planning. His articles: Business Planning I and Business Planning II are worth a few minutes to read. You may know many of the key points in these
articles it's worth reviewing them, especially if you're planning to buy or sell a business or separate from your business partner.
As many of you may know, the Labor Department on May 18, 2016, issued new regulations revising the overtime rule under the Fair Labor Standards Act. Basically, the rule fairly drastically modified the definition of “white-collar” workers substantially increasing the number of “non-exempt” workers.
The rule has three parts to it. The first part is that the employee must be paid on a salary (not hourly) basis. The third part of the rule is that the employee’s duties must be professional, administrative, executive, or outside-sales in nature. The second part of the rule is tied into compensation. If the employee makes less than a set amount (currently $23,660 annually), then he or she doesn’t fall into the white-collar exemption.
What did the Obama administration did was they more than doubled the salary component. What that would mean is that an additional 4.2 million (by the Labor Department’s estimate) workers would now be hourly employees entitled to overtime pay. Conversely, they would only be paid for the hours that they actually worked. Depending on your perspective, this could be good news or bad news. The other two parts of the rule remained unchanged. The Department just raised the salary threshold.
As you can imagine, a number of employers were not happy with this change. What may be surprising is that 21 states were also upset. They all sued in federal District Court in Sherman, Texas.
All of the plaintiffs in the case asked the court to stop the implementation of the revised rule. This is an injunction. In addition, they asked that the injunction be nationwide. On November 22, the judge agreed and issued a nationwide injunction stopping the implementation of this change in the rule.
In his 20 page opinion, the judge basically said that by so radically increasing the compensation part of the test (which isn’t even mentioned in the statute), the Labor Department effectively overrode the other two components of the test, which are in fact referred to in the statute. He felt that by doing so, the Department exceeded the authority given to it by Congress.
The government can appeal this decision. It would initially have to be appealed to the Fifth Circuit Court of Appeals which has not historically been favorably disposed to the government. So the case would probably end up in the US Supreme Court.
Although appeals can sometimes be expedited, it is almost a certainty that President-Elect Trump will have been sworn in before we see that happen. Many observers believe that he will not pursue this case, or he may simply abandon it. Although I don’t think it is on his first 100-days agenda, withdrawing the entire regulatory revision is a possibility as well.
For now though, the old rule stays in place. If an employee makes less than $23,660 annually, he or she is a non-exempt employee, no matter what. If he or she makes more than that, is paid on a salary basis, and performs professional, administrative, executive, or outside-sales duties, then the employee is probably an exempt employee.
Many baby boomers are finding themselves stuck between their children’s generation and that of their parents. We were recently caught in that dilemma with my in-laws. It turned out that the amount of their Social Security checks roughly equaled the premiums on their Medicare insurance. That didn’t strike me as such a good deal.
I think a lot of people are getting stuck in this conundrum. It’s a difficult place to be, and the rules governing Medicare and Medicaid are impossibly confusing. The US Supreme Court once referred to the Medicaid rules as “Byzantine construction… almost unintelligible to the uninitiated.”
Those are pretty harsh words from the Supreme Court. In my career I have done a lot of tax law. I can say that the Medicaid rules make tax law look fairly simple. However, without getting into the deep thicket of Medicaid details, I think we can break Medicaid down into two general categories.
When most people think of Medicaid, we think of the program implemented to assist financially distressed individuals to pay for their medical needs. It covers a limited number of treatments. In order to qualify, the applicant has to be financially needy in one of two ways.
The first classification of qualified applicants is those individuals who are “categorically needy.” People are “categorically needy” when they have less than $1,000 of “countable assets.” In addition, they cannot have monthly income equal to or greater than $834. Individuals who fall into this category are the people we would typically think of as Medicaid qualified.
There is, however, a second class of Medicaid beneficiaries. These individuals are referred to as “medically needy.” In Missouri (and the laws vary somewhat from state to state), “medically needy” applicants must have less than the $1,000 of countable assets. However, with regard to income, “medically needy” individuals simply must not have enough income to cover their qualified medical expenses. For instance, if the cost for a person in a nursing home is $6000 per month and they only earned $3,000 per month, Medicaid can make up the difference. That person would fall into the “medically needy” category.
In both of the classifications, there is a limitation on what are “countable assets.” Countable assets are any assets an applicant owns (or owned during the five years immediately preceding the application for Medicaid benefits where the assets were not exchanged for something of value – that is, gifts), but it excludes certain assets. For instance, a person’s house is not included in “countable assets” for qualification purposes, but the State will put a lien against the house for any Medicaid benefits paid. When the house is sold after the recipient’s death, then the State will collect any Medicaid amounts it paid out of the sales proceeds. So the exclusion of the house from countable assets is only temporary.
People for years have been trying to get around the Medicaid rules to have the government pay for their nursing home costs. When I started practicing law 35 years ago, it was pretty simple. Congress caught on, though. First, they made it illegal for grandma to transfer assets to qualify for Medicaid. If she broke the law, surely they’d put her in one of those nice prisons with good medical care. That seemed like a good option to some clients.
Congress caught on, though. So they made it a crime for family or advisors to help mom or dad plan to qualify for Medicaid. As you can imagine, this was disturbing to a lot of influential people. The concern was that it would paralyze legitimate planning for fear of violating the law. So once again, Congress caught on.
Beginning in 2006, when an individual applies for Medicaid, he or she has to add back the value of any assets transferred for less than fair market value during the immediately preceding five-year period (the “look back.”). If an asset was transferred for less than fair market value during the look back period, then the government calculates a penalty by dividing the value of the gift by a Medicaid factor. This calculation determines the number of months that the applicant will be disqualified. The disqualification basically runs from the date when the value of the applicant’s countable assets drops below the maximum permitted amount. It turns out that the disqualification can run for longer than five years. Timing an application is critical!