Three years ago, the Veterans Administration issued proposed regulations that were to significantly reduce the number of veterans eligible to receive enhanced pension benefits if they needed long term care. The proposed regulations instituted a lookback period and penalties for transfers within 36 months of filing for application for these enhanced pension benefits. There was a lot of pushback from advocacy groups since many felt that by putting their life on the line for their country, there should be no means-testing for benefits.
The previous rules allowed penalty-free transfers of assets prior to applying for assistance and several other tools that were more generous than state Medicaid programs. There was no lookback period had the veteran met certain income and asset limits. The asset limits were not specified, but $80,000 was the amount usually used. There were no penalties if an applicant divests him- or herself of assets before applying. That is, before now you could transfer assets over the VA’s limit before applying for benefits and the transfers would not affect eligibility.
Learn about the changes. The new regulations, effective October 18, 2018, set a net worth limit of $123,600. But in the case of the VA, this number will include both the applicant’s assets and income. It will be indexed to inflation in the same way that Social Security increases. An applicant’s house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home. Applicants will also be able to deduct medical expenses from their income, now including payments to assisted living facilities, as a result of the new rules.
The regulations also establish a three-year look-back provision for asset transfers. Applicants will be required to disclose all financial transactions within the three years before the application and show that these transactions were for the benefit of the veteran of spouse. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period that can last as long as five years. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to “self-support.”
Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR) for a veteran with one dependent in need of aid and attendance. For example, assume the net worth limit is $123,600 and an applicant has a net worth of $115,000. The applicant transferred $30,000 to a friend during the look-back period. If the applicant had not transferred the $30,000, his net worth would have been $145,000, which exceeds the net worth limit by $21,400. The penalty period will be calculated based on $21,400, the amount the applicant transferred that put his assets over the net worth limit ($145,000-123,600). The VA will disregard asset transfers made before October 18, 2018. Beware of the changes when making transfers after then.
Veterans and their loved ones who think they may be affected by the new rules may contact our office at (610) 940-0650 for a consultation to discuss how the new rules may impact your long-term care planning.