Changes to Veterans Pension Rules Are Looming — Plan Now!

Q. I’ve been an avid reader of your newsletter for many years. A couple of years ago, you published an article indicating that the Department of Veterans Affairs (VA) was proposing significant changes to needs-based benefit programs, such as the Veteran’s Aid and Attendance pension. You mentioned that the new rules were going to include a three-year look-back period for gifts and transfers into an irrevocable trust, similar to the Medicaid five-year look back rule. Did this new rule ever get put into place? I don’t recall seeing a follow-up article on this topic. My dad would be eligible for the Veterans Aid and Attendance benefit because he’s now in assisted living, but he’s got a lot of money and he’s been dragging his feet about coming to you to create the asset protection trust that he clearly needs. Is it too late now?

A. Thank you for being a loyal reader of our newsletter! Your memory serves you well — it was actually more than three years ago that we wrote about these proposed new VA regulations that everyone thought were going to be imminent, but as it has turned out, the VA has not taken any action to implement these regulations during these past three years or so, but that will be changing soon. . .

To answer your question about whether it’s too late for your father to set up an asset protection trust, the answer is it’s never too late to do asset protection planning, and the best time to do it is now.

Although it has taken the VA over three years, it now appears from sources “in the know” that the new rules by the Veterans Administration are going into effect on October 18, 2018. These new rules will of course make qualifying for the Veteran’s Aid and Attendance pension benefit more challenging than it has been, but you can rest assured that the Farr Law Firm Elder Law experts will be at the forefront of working through the new VA regulations and implementing the new asset protection strategies that are required to help our clients obtain these important benefits that they have earned by serving in the United States Armed Forces. Click Here for the new rule changes taking effect October 18, 2018.

The Veteran’s Aid and Attendance (A & A) Pension Benefit helps pay for unreimbursed medical expenses (not covered by Medicare or a Medicare supplement) for veterans and their surviving spouses. A & A is a useful program for those who need assistance with the activities of daily living. For more details on the A & A benefit and the requirements to qualify, please click here.

Proposed Changes to the VA Pension Rules

On January 23, 2015, proposed rule changes to amend the veterans pension application process were published by the VA in the Federal Register. When they go into effect, the new rule changes will have a dramatic effect on elder care planning for veterans. They mirror Medicaid rules in some ways, as they require a net worth determination and a look-back period, and impose penalties for asset transfers. And, as mentioned, the new rules are set to take effect soon, on October 18 of this year!  Below is a brief summary of the key proposals that will likely go into effect, although we don’t know yet if the VA has made any changes to the proposed regulations during the past three years:

Net Worth

The proposed rule imposes a net worth limit equal to the current maximum community spouse resource allowance for Medicaid purposes ($123,600). Net worth would be determined by combining annual income and assets. A veteran’s assets are defined to include both the assets of the veteran and the assets of his or her spouse. A surviving spouse’s assets would only include the assets of that surviving spouse.

Look-back on Asset Transfers

The proposal would establish a three-year look-back period for asset transfers for less than fair market value; Medicaid has a five-year look back period. The penalty period would be calculated based on the total assets transferred during the look-back period to the extent they would have exceeded a new net worth limit that the rules also establish.

Asset Exclusions

A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations. With the new rules, while your house will continue to NOT be a countable asset, there will now be a TWO ACRES LIMIT on the acreage your home. So, if you live on a farm or a large tract of land, this will be a huge challenge for you to receive A & A. Also, it is important to note that the house is not an exempt asset for Medicaid in Virginia, so houses must still be protected because anyone who is in need of Veterans Aid and Attendance will most likely, at some point in the future, be in need of Medicaid.

Penalty Period

Under the new regulations, veterans or their surviving spouse who transfer assets within three years of applying for benefits will be subject to a “penalty period” that can last as long as FIVE YEARS.

There is a complex calculation to determine the penalty period. Rule 3.276(e)(1) uses a single divisor for all claimants, which results in equal penalty periods for equal amounts of precluded asset transfers regardless of the type of claimant. The single divisor is the MAPR in effect on the date of the pension claim at the aid and attendance level for a veteran with one dependent. Click here for that rate, currently $21,961 per year.

Medical Expense Deductions from Income

Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning. These medical expenses are deducted from income. This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the new rules somewhat limit the circumstances under which room and board expenses may be counted, as well as the amount paid. There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application. Section (d)(3)(i)(B) now provides, in final paragraph (d)(3)(iv), that payments for meals and lodging, as well as payments for other facility expenses not directly related to health or custodial care, are medical expenses when either of the following are true: (A) the facility provides or contracts for health care or custodial care for the disabled individual; or (B) a physician, physician assistant, certified nurse practitioner, or clinical nurse specialist states in writing that the individual must reside in the facility (or a similar facility) to separately contract with a third-party provider to receive health care or custodial care or to receive (paid or unpaid) health care or custodial care from family or friends.

The proposed limited the hourly amount that can be paid to a home health care provider and based the amount on a national average, rather than local costs for care. The final rule does not include a limit to the hourly rate of in-home care.

Act Now Before It’s Too Late

Any veterans trust established before the effective date of the new regulations will, hopefully, not be subject to the new rules. Therefore, it is a good time to plan for the Veteran’s Aid and Attendance now, before the laws change. Here at the Farr Law Firm, we work with veterans and their spouses to evaluate whether they qualify for the Veterans Aid and Attendance Benefit and/or Medicaid, and we deal with all the paperwork. As an Accredited Attorney with the U.S. Dept. of Veterans Affairs and as a Certified Elder Law Attorney, I understand both the Veterans Aid and Attendance Benefit and the Medicaid program and the interaction between both benefit programs.

Filing a claim for A & A is complex and time-consuming, and the new regulations will make this benefit available to fewer veterans and/or their spouses—so act now! In addition, if you or your loved one is years away from needing nursing home care, is already in a nursing facility, or is somewhere in between, the best time to plan is now, not when you are about to run out of money. Please don’t hesitate to call us at any time to make an appointment for an initial consultation:

Fairfax Veteran’s Aid and Attendance Attorney: 703-691-1888
Fredericksburg Veteran’s Aid and Attendance Attorney: 540-479-1435
Rockville Veteran’s Aid and Attendance Attorney: 301-519-8041
DC Veteran’s Aid and Attendance Attorney: 202-587-2797

P.S. Another benefit of being a veteran is a 10% discount off all services at the Farr Law Firm. We hope to see your family soon!

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.