The needs-based pension program from the Department of Veterans Affairs (VA) is a disability benefits program available to compensate veterans for non-service-connected disabilities. Like the VA compensation program, the pension program is based upon disability. However, unlike the VA compensation program, the pension program is also based on income and need, and the veteran’s disability must be total and permanent (but need not be “service-connected”).

There are three (3) levels of pension available: (1) the basic pension, (2) “Housebound” benefits and (3) “Aid and Attendance” benefits.

  1. THE BASIC PENSION.

The pension is a tax-free, monthly monetary benefit paid to veterans (or eligible surviving spouses) who have limited or no income. A veteran cannot receive both a pension and service-related compensation simultaneously; if the veteran is eligible under both programs, the VA will pay whichever of the two benefits is the greater amount.

According to the Department of Veterans Affairs website, pension is a monthly benefit paid to financially needy wartime veterans. To be eligible for a pension, the veteran must be:

  • Age 65 or older, OR
  • Totally and permanently disabled, OR
  • A patient in a nursing home receiving skilled nursing care, OR
  • Receiving Social Security Disability Insurance, OR
  • Receiving Supplemental Security Income.

Qualified Veterans

To qualify for pension benefits, the veteran must be discharged under other than dishonorable conditions; must have wartime service (in general, for those entering military service before September 7, 1980, consisting of at least 90 days of active service, one day of which was during a wartime period); must have limited or no income; must meet net worth limitations; and must be age 65 or older, or be permanently and totally disabled.

Income Eligibility

With respect to income eligibility, the person’s countable family income must be below a yearly limit set by Congress. “Countable” income for VA purposes (“IVAP”) includes income from most sources, including earnings, disability and retirement payments, interest and dividend payments from annuities, and net income from farming or business, as well as waived income and income from joint accounts (in proportion to the claimant’s ownership interest). However, excluded from “countable” income is public assistance such as Supplemental Security Income (“SSI”), IRA interest, income tax refunds, loans (including reverse mortgages), insurance dividends, life insurance proceeds representing a return of premiums, and profit from the sale of property (other than from a regular business).

Net Worth Calculation

The veteran’s net worth, or the net value of the assets of the veteran and his/her dependents, is also considered by the VA and, although there is no specified resource limit, net worth cannot be “excessive.” When considering a claimant’s net worth, “No specific dollar amount can be designated as excessive net worth. What constitutes excessive net worth is a question of fact for resolution after considering the facts and circumstances in each case.” A number of variables must be taken into consideration when making a net worth determination. Factors to consider include:

  • income from other sources
  • family expenses
  • claimant’s life expectancy, and
  • convertibility into cash of the assets involved.

Thus, the older the claimant is, the smaller “net worth” the claimant requires to meet his or her needs. Resources countable in the “net worth” calculation include “assets such as bank accounts, stocks, bonds, mutual funds, annuities, and any property other than [the claimant’s] residence and a reasonable lot area.” Excluded from the net worth calculation are the claimant’s principle residence, personal motor vehicles and household objects/possessions.

Unreimbursed Medical Expenses

Notably, medical expenses may be used to reduce countable income if the total of those expenses exceeds 5% of the applicable MAPR. Permissible medical deductions include: nursing home fees; assisted living facility fees; in-home attendants being paid to care for the claimant; certain health insurance premiums, including the Social Security Medicare deduction; non-prescription drugs prescribed by a physician; prescription eyeglasses, doctors’ and dentists’ fees, physical therapy, hearing aids, and transportation to medical appointments. Veterans who do not initially qualify may reapply if they have unreimbursed medical expenses that bring their countable income below the annual income limit. 

MAPR

Once pension eligibility is established, the monthly pension amount is calculated as the difference between the veteran’s countable family income and the annual pension limit (the MAPR), payable in monthly installments.

In addition to the basic pension, more severely disabled veterans may also qualify for Aid and Attendance or Housebound benefits.

  1. HOUSEBOUND BENEFITS.

Housebound benefits are paid in addition to the monthly pension for a veteran (or eligible surviving spouse) who qualifies for the pension and who:

  1. has a total permanent disability and, as a result, is permanently and substantially confined to his/her premises; or
  2. has a total permanent disability plus another disability or disabilities that are 60% or more disabling.

The requirement of being “permanently housebound” is met where the veteran “is substantially confined to such veteran’s house (ward or clinical areas, if institutionalized) or immediate premises due to a disability or disabilities which it is reasonably certain will remain throughout such veteran’s lifetime.”

Once housebound eligibility is established, the monthly pension amount is calculated as the difference between the veteran’s countable family income and the annual pension limit (the MAPR), which limit is increased above the regular pension rate for those eligible for housebound benefits, payable in monthly installments.

  1. AID AND ATTENDANCE BENEFITS.

Aid and Attendance (“A&A”) is a benefit that is paid in addition to the monthly pension. A&A is available to a veteran (or eligible surviving spouse) who qualifies for the pension and who:

  1. is bedridden, or
  2. requires the aid of another person to perform activities of daily living, or
  3. is a nursing home resident, as a result of mental or physical incapacity, or
  4. is blind or nearly blind in both eyes.

A person is considered in need of regular aid and attendance if the person is “(1) a patient in a nursing home or (2) blind, or so nearly blind or significantly disabled as to need or require the regular aid and attendance of another person.”

Once A&A eligibility is established, the monthly pension amount is calculated as the difference between the veteran’s countable family income and the annual pension limit (the MAPR), which limit is increased above the regular pension and housebound rates for those eligible for A&A benefits, payable in monthly installments.

  1. VA PENSION BENEFITS AND MEDICAID PLANNING.

Planning for the older disabled veteran often involves planning for Medicaid eligibility. When VA pension planning and Medicaid planning intersect, keep in mind that the Medicaid transfer rules are very different from current VA rules. Transfers accomplished for purposes of establishing VA pension eligibility may have negative consequences to a later Medicaid application.

The VA is generally much more liberal than Medicaid in the treatment of transfers of assets: if a VA claimant makes a transfer to a person outside the claimant’s household, and relinquishes all rights of ownership and control, the claimant’s net worth is reduced by the amount of that transfer. Legislation has been proposed that would establish gift penalties, with a 3-year look-back period, for VA pension claims. However, because currently there is no transfer penalty associated with gifts to third parties, planning for VA pension eligibility is a relatively simple matter.

One technique is to retitle assets into joint names (assuming that the joint owner is not living in the veteran’s household). The VA will only count the veteran’s pro rata share of the asset(s).

However, if the veteran transfers property but retains a life estate, the transfer will be ignored by the VA.

If a veteran has high income and is in need of regular aid and attendance or is housebound, according to the primary physician, then a personal services contract may be entered into between the veteran and a family member, for assistance with activities of daily living, managing medical care and medications, and payments under the personal services contract will qualify as UME.

The entire VA pension benefit is excluded as income, for Medicaid purposes, to the extent that the pension benefit resulted from “unusual medical expenses.”

If a pension claimant is in a nursing facility and is receiving Medicaid, the VA pension benefit is reduced to $90 per month.

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For additional information concerning VA compensation and pension benefits, visit: http://vanarellilaw.com/va-benefits/

For additional information concerning Medicaid and public benefits planning, visit: http://vanarellilaw.com/medicaid-public-benefits-planning/