Proposed New VA Rules for Pension Benefits
The VA has a pension benefit to help certain financially eligible wartime veterans or spouses of deceased veterans. This pension benefit has come to be known as the Aid and Attendance Award.
The VA has recently published proposed changes in determining who qualifies for this Award. The following is a brief summary of these changes.
New Worth: The rules tie the net worth asset limit to the Medicaid Spousal Impoverishment level (currently $117,240) and increase it for inflation. Annual income is added to the net worth amount to determine eligibility. Example: An eligible spouse with assets of $100,000 and annual income of $10,000 would have a VA net worth of $110,000, meeting eligibility requirements. Unreimbursed medical expenses reduce your net worth for the VA asset level test.
A principal residence is not considered an asset. The proceeds from the sale of the principal residence are not counted as assets after the sale if the proceeds are reinvested in a new principal residence purchased in the same calendar year.
Transfer of Asset Penalty: The VA is considering imposing unfair penalties for gifts of “covered assets”. A “covered asset” is an asset that was part of claimant’s net worth and was transferred, reducing claimant’s net worth below the net worth limit. This would apply to the value of assets transferred, which would otherwise put the assets of the veteran above the asset cap of $117,240. The purchase of an annuity can be considered an improper transfer. The look back period is 36 months immediately prior to filing an application for benefits. There is up to a 10 year penalty period created by an improper transfer.
The penalty period is determined by a formula using the maximum allowance the veteran or spouse will be entitled to. This severely impacts a surviving spouse! A veteran may be entitled to a monthly award of $1,789 while the surviving spouse gets a maximum of $1,149 per month. A transfer of $10,000 would penalize the veteran for 5.6 months while penalizing the surviving spouse for 8.7 months.
The penalty only applies for gifts that reduce the net worth below a minimum of $117,240. So a couple with a net worth of $90,000 can give away $30,000 without a penalty under the VA rules. A couple with a net worth of $120,000 will be penalized if they give away more than $2,760.
There are exceptions to the gifting rules for spouses. There are no exceptions for birthday or Christmas gifts! We will periodically update our website to keep you informed when these changes become effective.
Keith P. Huffman