Transfer Penalties on the Horizon

On June 6, 2012, the U.S. Senate held a hearing on VA “aid and attendance” benefits.  For a variety of reasons, the suggestion was to create a look back period and penalty for transferring assets with the intent to then qualify for benefits.  

California has a penalty for transferring assets to qualify for Medi-Cal benefits but proper and well-accepted planning techniques can minimize and oftentimes eliminate these penalties.  But if the VA imposes a penalty, it could be a game changer.   

On June 6, 2012 a bill was introduced to provide the following: 

A lookback period of 36 months, beginning on the date of application; (2) A period of ineligibility for gifts, or transfers of assets made during the lookback period for less than fair market value, including transfers to trusts, or purchases of annuities or other financial products; (3) A method of calculating the length of the ineligibility period resulting from a transfer of assets for less than fair market value made during the lookback period, as follows: the value of the transferred assets divided by the value by the monthly pension amount the applicant would have received but for the gift equals the number of months of ineligibility resulting from the gift; and, (4) The ability to fully cure a gift. 

In California this would force clients to plan much earlier than before to get past the lookback period prior to needing to access benefits.  The transfer penalty for a pre Medi-Cal transfer starts when the transfer is made.  The VA penalty period would start when you apply!  This creates a much longer period of ineligibility that must be managed in the estate plan. 

The good news is that there are a variety of options in this regard that still give clients control and flexibility yet plans well in advance for the long-term care risk.

For more information, please contact me

This entry was posted on Monday, July 2nd, 2012 at 2:41 am and is filed under Veterans.