Presently, the VA Special Pension program bases eligibility on a “snapshot” of the income, expenses and very low assets of the applicant as of the time of the application. There is no specific asset limit, no look-back or transfer penalty (unlike Medicaid), and the applicant’s income is offset by qualified recurring medical expenses to see if the remaining income is below the qualifying level. The test of low assets is subjective. The VA has just 2015 proposed VA special pension regs that would dramatically change the criteria for eligibility. Some of the changes import procedures or requirements that are used in the SSI and institutional Medicaid programs. Last-minute planning involving transfers of assets will be a thing of the past.
Here are the major changes that are proposed. Quotes are from the proposal summary in the Federal Register:
1. 36-month look-back: The VA will recapture into the asset calculation the value of assets that were transferred for less than fair market value during the look-back period preceding the date of application. The ‘‘covered asset amount’’ would be the monetary amount by which net worth would have exceeded the limit on account of a covered asset if the uncompensated value of the covered asset had been included in the net worth calculation.
2. Net worth/asset limit: The residence is still exempt, along with only up to 2 acres of the land that the residence is on. The residence remains exempt even if the applicant resides in a facility or in the home of a third party such as a child. The asset limit would be the maximum amount that the federal government sets under the Medicaid program as the Community Spouse Resource Allowance (CSRA), which is $119,220 in 2015. The net worth calculation would include both the assets and the income. Debt and mortgages would not be used to offset the value of the countable assets.
3. Uncompensated transfer: The definition will be similar to Medicaid. However, funds used to purchase annuities and funds placed into trusts will be counted as uncompensated transfers. If funds were transferred, there will be a rebuttable presumption (similar to Medicaid and SSI) that the transfer was done for the purpose of reducing net worth so as to qualify for VA pension. The burden of proof is on the applicant, who must prove it by clear and convincing evidence. “The presumption could be rebutted if the claimant establishes that he or she transferred an asset as the result of 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.” This appears to be a more limited exception than the one in the Medicaid regulations.
4. Exceptions to transfer penalty: Transfers to a trust for sole benefit of the veteran’s child who the VA rates or has rated as permanently incapable of self-support are excluded from penalty. The trust cannot be available for support of the veteran or his spouse or surviving spouse.
5. Calculating the transfer penalty: “VA’s formula would determine a penalty period in months by dividing the covered asset amount by the applicable maximum annual pension rate under 38 U.S.C. 1521(d), 1541(d), or 1542 as of the date of the pension claim, rounded down to the nearest whole number.”
6. Transfer penalty period: It starts on the date there otherwise would have been the first pension payment, and can last for up to 10 years.
Veterans or their surviving spouses who are struggling to put together home care arrangements or to pay for assisted living often need to turn to VA Special pension to help pay for this care. Previous posts highlighted the current differences among the available government programs. If these proposals are adopted, higher net worth individuals will have to think about three-year advance planning, or will just spend down the excess assets and postpone their application date accordingly.
Call for an elder law consultation to discuss your individual concerns and what programs may be of use for you … 732-382-6070