Q. I heard there are changes to the eligibility for VA pensions and other veterans’ needs based programs. What are the changes and when do they take effect?
A. The amendments have been a long time coming, but I first got to see the final rules that have been adopted around September 17th and the changes take effect on October 15, 2018. The amendments establish new requirements for evaluating net worth and asset transfers for pensions, including what is popularly called Aid and Attendance benefits. The ninety (90) day active duty with one day of war time (not a boot on the ground) service for the veteran did not change and a widow is still entitled to draw if her husband served under the Aid and Attendance program for long term care. The VA considers the later term a misnomer and confusing because a higher aid and attendance rate may apply and be payable under the pension program, parents’ DIC, disability compensation, DIC for surviving spouses and death compensations.
The new rules also clarify which medical expenses may be deductible as net income. Overall the changes are fair to the system and veterans, although one element may adversely affect rural veterans and their widows’ more than urban dwellers.
Net worth is defined as the sum of the claimant’s non-exempt assets and annual income, but the net worth amount was increased to $123,600 for 2018. When calculating the exemption for “the residential lot area” for a veteran’s home, the lot is not to exceed 2 acres or 87,120 sq. feet, unless the additional acreage is not marketable. Many of my rural clients have 5+ acres. The extra acres will be counted at their fair market value for determining net worth unless there are zoning requirements prohibiting smaller lots. While not required by the VA this could force people to sell additional acreage, a vacation home or time share. Real property is counted whether or not for sale. Rent and mortgage payments have never been deductible from net worth.
It has not changed that household items, personal effects and family vehicles are exempt assets when calculating net worth.
The VA does not distinguish between liquid and non-liquid assets. Annuities and trusts that can be liquidated for the benefit of the claimant is now considered as an asset in net worth calculations. If the annuity can’t be liquidated then it doesn’t count as income, only the distributions. RMDs have always been counted as income.
Unreimbursed medical expenses for both the husband and the wife can be deducted from income. The income of certain dependents is countable.
The VA also established a 36 month look-back-period for the transfer of assets and a 5 year maximum penalty period. When the transfer would not have disqualified the claimant there is no penalty. Transfers for less than fair market value would include any transfer, purchase of, or investment that reduces net worth and would not be in the claimant’s financial interest. This could include trusts and annuities. This presumption could be rebutted by clear and convincing evidence of fraud, misrepresentation and unfair business practices related to the sale or marketing of financial services for the purposes of entitlement. Individuals will have the opportunity to return all conveyed assets before filing or within 60 days after being notified by VA of the penalty period with an additional 30 days to notify the VA of the complete or a partial cure. The rule is not retroactive.
A claimant may decrease assets by spending down on items or services for which fair market value is received. Generally receipts are not required, although it might be a good idea.
The VA has more clearly defined “activities of daily living” (ADLs); “custodial care”; and “assisted living, adult day care, and similar facility”. Custodial care is regular assistance with two or more ADLs or supervision because of a mental disorder such that being left alone would be unsafe for the claimant. Medical expenses do not include either assistance with ADLs or meals and lodging. Thus medical expenses are subtracted from countable income and actual payment of medical expenses, including residential care, does reduce net worth. The VA does not deduct future expenses rather it considers projected unreimbursed medical expenses such as monthly residential care payments.
The VA is amending application forms in conjunction with the new final rules.
These financial benefits are tax free and can be over $2000 a month for a homebound elderly veteran or about half this amount for his widow. Funds are paid directly to the veteran or his agent to help with the cost of private in-home care or residential care expenses. If you’d like more information on the new VA pension rules consider attending one of the free classes I’m offering.
Disclaimer: Information contained in this column is meant to be of general information on frequently asked questions concerning disability, elder law, VA benefits, estate planning and probate law, and does not contain specific legal advice to a client. No attorney-client relationship is created by reading this column.