Early this year, the Department of Veterans Affairs (VA) proposed sweeping changes to its regulations for the Aid and Attendance Pension program. The Aid and Attendance Pension is an important benefit to veterans as well as their spouses and widows who need assistance with activities of daily living (whether at home or in a care facility). The benefit offers up to $25,440 annually (tax free) and is available to veterans with at least 90 days of service at least one of which occurred during a “wartime period.” There is no requirement that the veteran have served in actual combat and their discharge cause can be anything except “dishonorable.” Each year, veterans and their spouses receive approximately $5 billion dollars in Aid and Attendance benefits.
Historically, the VA did not use a bright line asset test to determine eligibility for the Aid and Attendance Pension. Qualification instead depended on a complicated formula involving income, age, health expenses and assets. Importantly, the VA did not look at whether assets had been transferred or gifted. Under the proposed changes, the VA would impose rules similar to those used to determine qualification for Medicaid. The new rules would include:
- A 36 month look back period and associated penalty period. Similar to the longstanding Medicaid rule, any assets given away or transferred within 36 months of the application would incur a penalty period of ineligibility. (Medicaid uses a 60 month look back period.) Unlike Medicaid, however, the VA would not allow transfer of funds to an irrevocable trust or a Single Premium Immediate Annuity (SPIA). The penalty period would depend on the number of assets transferred, but for illustration, a veteran transferring $50,000 would be ineligible for 28 months and a spouse transferring the same amount would be ineligible for 44 months. Importantly, the penalty period would begin from the date of the last gift and would not take into account whether the transfer was made 1 month or 35 months prior to application.
- Bright line asset limits. The VA would impose strict limits on total net worth (excluding a primary residence and a vehicle) that would be equal to the maximum Medicaid Community Spouse Resource Allowance. This is currently $119,220. The VA would include both assets and expected income in the year of application in determining this number, but reductions would be made for costs associated with food, clothing, shelter and health care. There would be no variance for the age of the applicant or the amount of care needed.
The changes proposed by the VA come on the heels of failed attempts to push similar changes through Congress in 2012 and 2014. The VA is now sidestepping the need for congressional action with the assertion the proposed changes are simply implementing the program’s original intent. As is often the case with controversial laws and regulations, legal challenges will almost certainly be lodged when the new requirements are implemented, most likely before the end of 2015.
The complete regulations can be found at https://federalregister.gov/a/2015-00297 . Although the formal comment period closed on March 24, 2015, you can still voice your opinion by contacting your local House or Senate representative.
As always, thanks for reading.
Barry M. Meyers
David M. Neubeck
Elder Law Offices of Barry M. Meyers, P.S.
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