The Department of Veterans Affairs (VA) has finalized new rules that make it more difficult to qualify for long-term care benefits. The rules establish an asset limit, a look-back period, and asset transfer penalties for claimants applying for VA pension benefits that require a showing of financial need. The principal such benefit for those needing long-term care is Aid and Attendance.
The VA offers Aid and Attendance to low-income veterans (or their spouses) who are in nursing homes or who need help at home with everyday tasks like dressing or bathing. Aid and Attendance provides money to those who need assistance.
Currently, to be eligible for Aid and Attendance a veteran (or the veteran’s surviving spouse) must meet certain income and asset limits. The asset limits have not historically been specified. Unlike with the Medicaid program, there have been no penalties if an applicant divests him- or herself of assets before applying. That is, before now you could transfer assets over the VA’s limit before applying for benefits and the transfers would not affect eligibility.
Not so anymore. The new regulations set a net worth limit of $123,600, which is the current maximum amount of assets (in 2018) that a Medicaid applicant’s spouse is allowed to retain. But in the case of the VA, this number will include both the applicant’s assets and income. It will be indexed to inflation in the same way that Social Security increases. An applicant’s house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home. Applicants will also be able to deduct medical expenses — now including payments to assisted living facilities, as a result of the new rules — from their income.
The regulations also establish a three-year look-back provision. Applicants will have to disclose all financial transactions they were involved in for three years before the application. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period that can last as long as five years. This penalty is a period of time during which the person who transferred assets is not eligible for VA benefits. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to “self-support.”
Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR) for a veteran with one dependent in need of aid and attendance. For example, assume the net worth limit is $123,600 and an applicant has a net worth of $115,000. The applicant transferred $30,000 to a friend during the look-back period. If the applicant had not transferred the $30,000, his net worth would have been $145,000, which exceeds the net worth limit by $21,400. The penalty period will be calculated based on $21,400, the amount the applicant transferred that put his assets over the net worth limit (145,000-123,600).
The new rules go into effect on October 18, 2018. The VA will disregard asset transfers made before that date. Applicants may still have time to get through the process before the rules are in place.
If you have been contemplating reviewing your eligibility for VA pension benefits, now is the time to do so. However, even with new eligibility rules, VA pension planning will continue to be available and necessary for many veterans and surviving spouses of veterans. We remain prepared to work with our veteran clients and their families to determine the plan and benefit most suited to their individual needs. We will also continue to guide clients through a well-reasoned analysis to determine what public benefit fits an individual client’s situation best and help balance the different requirements of each public benefit program.
To read the new regulations, click here.