In 10 days, the new VA Aid & Attendance Pension eligibility rules go into effect. The changes primarily impact the following: (1) Net Worth criteria; (2) Look-Back and Transfer Penalties (which also preclude the purchase of most annuities); and (3) clarification of allowed medical deductions. Because the VA will disregard any transfers/gifts prior to October 18, 2018 you still have time to act if you have excess Net Worth. If you are at all interested in learning more about how the VA Aid & Attendance pension might help now, or later, with the cost of long term care you should seek legal counsel immediately.
2018 VETERANS AID AND ATTENDANCE PENSION RULES: Effective 10-18-2018
I. What are Veterans Aid and Attendance (A&A) Pension Benefits?
The “Aid and Attendance Pension” is a little known cash benefit paid in addition to low income pension to certain wartime veterans or their widows, who have non-service connected disabilities. This Pension benefit was established in 1952 under Title 38 U.S.C. to provide qualified veterans and their surviving spouses with a tax free pension benefit to help defray the cost of long-term care in assisted living facilities or at home. The Veterans Aid and Attendance Pension benefits can make a big difference in the ability of the Veteran or Veteran’s surviving spouse to afford basic costs of living, an in-home caregiver in order to be able to stay at home, or to afford to live in an assisted living facility of their choice.
The VA has established minimum income limits and if the Veteran’s or surviving spouse’s “net” income after deducting medical expenses is under the established amount, the VA will pay the difference to bring the Veteran or surviving spouse up to the established amount. In general, if medical expenses exceed 5% of that limit, they can be deducted to reduce income and increase level of pension.
II. What are the qualifications for A&A Pension Benefits?
There are three criteria for qualifying for A&A benefits:
- Qualifying Military Service
- Medical Necessity
- Financial Eligibility: Net Income and Net Worth
III. Qualifying Military Service
Generally, the Veteran must have the following military service:
- Veteran was discharged from service under conditions other than dishonorable, AND
- Veteran served at least 90 days of active military service, one (1) day of which was during a war time period.
War Time Periods:
World War I. April 6, 1917, through November 11, 1918, inclusive. If the Veteran served with the United States military forces in Russia, the ending date is April 1, 1920. Service after November 11, 1918, and before July 2, 1921, is considered World War I service if the Veteran served in the active military, naval, or air service after April 5, 1917, and before November 12, 1918.
World War II. December 7, 1941, through December 31, 1946, inclusive. If the Veteran was in service on December 31, 1946, continuous service before July 26, 1947, is considered World War II service.
Korean conflict. June 27, 1950, through January 31, 1955, inclusive.
Vietnam era. The period beginning on February 28, 1961, and ending on May 7, 1975, inclusive, in the case of a Veteran who served in the Republic of Vietnam during that period. The period beginning on
August 5, 1964, and ending on May 7, 1975, inclusive, in all other cases.
Persian Gulf War. August 2, 1990, through date to be prescribed by Presidential proclamation or law.
IV. Medical Necessity
Veteran/widow age 65 or older, or if younger, permanently and totally disabled may be eligible for A&A when:
- The Veteran/widow requires the aid of another person in order to perform personal functions required in every day living, such as bathing, feeding, dressing, attending to the wants of nature, adjusting prosthetic devices, or protecting himself/herself from the hazards of his/her daily environment, OR,
- The Veteran/widow is bedridden, in that his/her disability or disabilities requires that he/she remain in bed apart from any prescribed course of convalescence or treatment, OR,
- The Veteran/widow is a patient in a nursing home due to mental or physical incapacity, OR,
- The Veteran/widow is blind, or so nearly blind as to have corrected visual acuity of 5/200 or less in both eyes, and concentric contraction of the visual field to 5 degrees or less.
V. Financial Eligibility
Income includes income received by the Veteran and his or her dependents (e.g., spouse), if any, from most sources. It includes earnings, disability and retirement payments, interest and dividends, and net income from farming or business.
2. Net Worth.
Net worth limit for claimant and their dependent, if any, is $123,600.00. Net worth is the value of the Veteran’s and dependent’s countable assets plus the annual net income. Net annual income is the equivalent of the claimant and their dependent’s gross annual income, less all applicable deductible medical expenses.
Example: Single Veteran has $117,000 in assets and net annual income of $9,000. The total of $126,000 exceeds net worth limit of $123,600. Veteran is not eligible.
VI. Look Back and Transfer Penalty Rules
**VA will disregard asset transfers made before October 18, 2018**
Look Back Period is 3 years*: Claimants must disclose any asset transfer that occurred within 3 years prior to application.
Transfer Penalty Period*: The amount of the transfer which is subjected to penalty is known as the “Covered Asset”. Covered asset is the asset that was part of claimant’s net worth ($123,600), that was transferred for less than fair market value, and if not transferred would have caused or partially caused the claimant’s net worth to exceed the net worth limit.
Example: Single Claimant has no income and assets total $115,900. He gifted $30,000 to a friend. If he had not transferred the funds, his net worth would have been $145,900. The “covered asset” amount is $22,300.00, because this is the amount over the limit ($123,600).
Special Note: VA rules specifically state that purchase of an annuity or funding of a Trust from which the Veteran no longer has full access to the funds will be treated as a transfer.
Penalty calculation: Length of Penalty is the equivalent of the amount of “Covered Asset” divided by the maximum pension rate for a veteran in need of A&A with 1 dependent in effect as of the date of the claim, divided by 12, [currently $2,169] and rounded down. Penalty begins the first day of the month following the gift/transfer.
Exceptions: Fraud, misrepresentation, or unfair business practice related to the sale or marketing of financial products or services for purposes of establishing entitlement to VA pension, or transfer to certain trust for disabled child.
Example: $22,300 ÷ $2,169= 10 months penalty
The maximum penalty is five years.
VII. How Does VA calculate the A&A pension amount?
The annual A&A pension is calculated by first totaling all of the countable income. Then, any allowable deductions for unreimbursed medical expenses (UME) are subtracted from that total. The remaining countable income is deducted from the appropriate annual A&A pension limit, which is determined by the number of dependents, if any. This amount is then divided by 12 and rounded down to the nearest dollar. This gives the amount of the monthly payment.
If unreimbursed medical expenses (UME) exceed 5% of the maximum benefit amount, they can be deducted to reduce income. The expense for a state-licensed nursing home/assisted living facility is typically the most significant expense. Nursing home expenses are 100% deductible as UME. By contrast, the cost of assisted living or independent living will only be deducted as UME if: (1) the assisted living facility provides “custodial care” which is defined as assistance with at least 2 activities of daily living (ADL’s), or (2) if the facility does not provide assistance with the ADL’s, the claimant contracts with a third-party provider for assistance with ADL’s and the claimant’s physician states in writing that the claimant must reside at that facility to separately contract for said custodial care. General “room and board” expenses are not deductible. Deductible expenses also include Medicare premiums (part B and/or D, in-home care (medical), hygienic supplies (Depends, etc.), adult day care, and supplemental health care premiums. Expenses for the spouse (Veteran’s Pension) are also countable. If he or she is in a care facility, only the medical portion of the costs is a deduction and the portion for room and board is not. In-home care that is medical in nature is also deductible, but housekeeping, laundry, cooking, and shopping assistance are not.
2018 Maximum Benefit Amounts
|2 Veterans/Spouses||$2,903 per month||$34,836 annually|
|Married Veteran||$2,169 per month||$26,028 annually|
|Single Veteran||$1,830 per month||$21,960 annually|
|Surviving Spouse||$1,176 per month||$14,112 annually|
Single Veteran receives $1,500.00 per month in income, consisting of Social Security retirement and pension. He has $10,000.00 in savings, plus his home and car. He pays for home health care, costing $2,000.00 per month. After deducting the $2,000.00 in medical expense from the $1,500.00 in income, his net monthly income is zero (no negative numbers). Since he is a single Veteran, his monthly income per the VA should be $1,830.00. Thus, the VA will pay him $1,830.00 per month in A&A pension benefit.
Married Veteran and his spouse receive combined incomes of $3,000.00 per month. They have $50,000.00 in savings, a house, and a car. The Veteran’s medical expenses total $2,000.00 per month. After deducting the medical expenses of $2,000.00, the net income is $1,000.00. Since a Married Veteran should be entitled to $2,169.00 per month, the VA will pay the difference of $1,169.00 per month in A&A pension benefit.
CALL US TODAY AT 480-922-1010 TO HELP YOU DETERMINE IF VA Aid & Attendance Pension planning and benefits are right for you.