Proposed Government Changes to VA Pension Rules

 

On January 23, 2015, the Veterans Administration published proposed rule changes for some benefit programs.  These changes, in my opinion, are designed to ebb the flow of applications and to stop the transfers of assets in order to qualify for benefits.

The rules address net worth limits, transfers of assets, medical expenses, and income deductions.  To a large extent the rules are designed to mimic the Medicaid (Medi-Cal) rules, except that California has not yet implemented the Deficit Reduction Act rules, so these rules are a bit more ominous.

Net Worth

Net worth would be limited to the spousal allowance resource for Medicaid.  However, income would be added to the net worth calculation.  So if a claimant filed a claim and had $117,240 in resources (the Medicaid limit) but also earned $10,000 in income, the net worth would actually be calculated as $127,240 and that person would be disqualified.

The assets can be reduced by spending them or as they decrease in value, or both.  The claimant can still qualify if there are additional expenses that may reduce the income calculation (such as medical expenses).

Personal residences would be excluded even if the claimant is not residing in the residence.

Asset Transfers

Transfers would be penalized if they are covered assets (assets that would exceed the allowable net worth).  The lookback period would be 36 months and there is a presumption that a transfer made during this period was done for the purpose of reducing assets to qualify for the pension.  There are some exceptions if clear and convincing evidence supports a showing of fraud, misrepresentation, or unfair business practices related to the sale or marketing of financial products or services for the purposes of establishing the pension.   Interestingly, if a true gift (unrelated to pension qualification) such as if a person gave a child a gift of a car two years ago, this may cause the claimant to be denied VA Pension.

Penalty Period

There is a 10 YEAR limit on penalties imposed but the actual period is determined in a manner similar to Medi-Cal calculations for disqualification.

The effect of these rules can be quite surprising and discriminate against a surviving spouse vs a married couple.  Innocent gifts to children can catch the parent in a disqualification.  There are many other traps for the unwary which brings to the forefront why professional assistance is needed in this highly complex area of public benefits planning.

ElderCounsel, LLC has provided this office permission to send a comprehensive analysis of the proposed changes to the VA Pension rules.  Please email me for a free copy of this white paper.

This entry was posted on Friday, February 13th, 2015 at 8:32 pm and is filed under Estate Planning, Veterans.