This is an article from The Law Firm of Evan H. Farr, P.C. in Fairfax Virginia that we thought others may find helpful.
The Department of Veterans Affairs (VA) helps veterans and their families by providing supplemental tax-free income through the VA Special Pension with the Aid and Attendance benefit. The Aid and Attendance benefit helps veterans to offset the high cost of medical care and access care that they otherwise might not have been able to obtain.
While the Aid and Attendance benefit is a needs-based program, there is currently no penalty for applicants who divest themselves of assets immediately before applying for benefits. As it stands, veterans who are unable to perform IADLs (Instrumental Activities of Daily Living), such as bathing, dressing, toileting, etc., without assistance are eligible to receive Aid and Attendance benefits. In addition, the VA presumes eligibility for Aid and Attendance if the veteran is in nursing home care.
Earlier this year, the VA proposed to amend its regulations governing entitlement to Aid and Attendance. The proposed regulations would establish new requirements pertaining to pre-application net worth evaluations and asset transfers to qualify for the benefit.
Proposed changes by the Department of Veterans Affair will severely restrict the benefits available to those who have failed to do the proper planning. They are, as follows:
- Look-back period: A 3-year look-back will be imposed on transfers of assets, including gifts to persons, trusts, or purchases of annuities. Benefits could be denied for up to 10 years due to transfers. All gifts in the look-back period will be presumed to have been made to qualify for benefits. And, there will be no allowance to give away money to your church, for a wedding gift to a grandchild, etc.
- Widow’s penalties will be almost twice as long as veteran’s penalties. For example, if a veteran gave away $50,000, he or she would get a 28-month penalty. That is, he or she wouldn’t qualify for benefits for 28 months. A widow would be penalized for 44 months.
- Clear net worth limit: One good feature of the new rules is that they will establish a clear net worth limit (currently suggested to be $119,220 — Medicaid’s maximum community spouse resource allowance in 2015), but where for Medicaid this amount is an asset limit, for the Aid and Attendance it combines both annual income and assets. This amount would be indexed for inflation by adjusting it at the same time and by the same percentage as cost-of-living increases provided to Social Security beneficiaries.
- Exempt primary residence: The VA would exempt the claimant’s primary residence and surrounding land (but only up to 2 acres), from being included as an asset. However, if the residence is sold, the proceeds will count toward net worth unless they are used to purchase another residence within the same calendar year.
- Monthly pension sunsetting: The regulations set November 30, 2016 as the sunset date for the $90 monthly pension that has been allowed to veterans or spouses who receive Medicaid paid nursing home care.
- Independent living facilities: The new rules would provide that, generally, payments to facilities such as independent living facilities are not medical expenses, nor are payments for assistance with Instrumental Activities of Daily Living such as cooking, cleaning, and bill paying. However, there would be exceptions for disabled individuals who require health care services or custodial care.
The transfer penalty rule will mean that eligibility for VA needs based pension programs, such as Aid and Attendance, will become similar to that for SSI and Medicaid long term care benefits. The addition of the asset transfer prohibitions and penalties will create a significant new barrier for many veterans and add complexity to the filing and processing of claims. The added complexities suggest that veterans will be even more in need of planning assistance prior to applying for pension.
So, when might all this take place?
Regulation changes are coming, and some experts believe they could take effect as early as January 1, 2016. At this time, the VA has not established any firm date, but some VA offices are already processing applications as if the rules are in effect. Therefore, veterans should strongly consider working with a Certified Elder Law Attorney, such as myself, sooner rather than later, to investigate their options quickly, wrap up any pending cases, and get them filed with the VA prior to the implementation of these regulatory changes.