The Department of Veterans Affairs (VA) needs-based pension program is available to compensate veterans for non-service-connected disabilities. Like the VA compensation program, eligibility for the pension program is based upon disability. Unlike the VA compensation program, however, the pension program is also based on income and financial need. To be eligible for benefits, the veteran’s disability must be total and permanent, but need not be “service-connected.” There are three (3) levels of VA pension benefits available: (1) the basic pension, (2) “Housebound” benefits and (3) “Aid and Attendance” benefits. The VA pension program helps pay for unreimbursed medical expenses (not covered by Medicare or other medical insurance), and is useful to veterans who need assistance with activities of daily living. This blog contains many articles on VA pension benefits. For more information on VA pension benefits and the requirements to qualify, please click here.
Changes to the VA Pension Rules
Over three (3) years ago, in January 2015, proposed rule changes amending the regulations governing veterans’ eligibility for VA pensions and other needs-based benefit programs were published in the Federal Register. Although it has taken the VA over three (3) years, the new rules were published in the Federal Register today, and will be effective in thirty (30) days, on October 18, 2018.
The amended regulations mirror the Medicaid rules, as they require a net worth determination, establish a look-back period and impose penalties for asset transfers. New requirements also identify the medical expenses which may be deducted from countable income for VA’s needs-based benefit programs. The new rules will make qualifying for VA pension benefits more challenging than ever.
Net Worth
For purposes of entitlement to VA pension, countable net worth includes all countable assets plus annual gross income. Example of “net worth” calculation: A claimant’s assets total $117,000 and annual income is $9,000. Therefore, adding the claimant’s annual income to assets produces net worth of $126,000.
The term “countable assets” means the fair market value of all property that an individual owns, including all real and personal property, unless excluded under the regulations, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.
A veteran’s assets include the assets of the veteran as well as the assets of his or her spouse.
The new net worth asset limit is $123,600. This limit will be increased each year by the same percentage as the Social Security benefit amounts increase due to cost-of- living increases.
The VA will deny or discontinue pension if a claimant’s or beneficiary’s net worth exceeds the net worth limit.
A claimant may decrease assets by spending on items or services for which fair market value is received. Such purchases cannot be on any item that the VA considers to be a countable asset. One example of spending down assets would be the payment of medical expenses during a non-qualifying year, but other expenditures will also be acceptable; e.g. vacation expenditures, a pre-paid burial policy, purchase of a car, etc., provided that the expenditures are for the claimant or his/her spouse.
Asset Exclusions
Countable assets do not include the following:
Primary residence. The primary residence is exempt, regardless of where the claimant actually resides and regardless of the value of the residence; however, the residential lot area cannot exceed 2 acres. Anything over 2 acres would be countable in net worth. If the residence is sold after pension entitlement is established, net proceeds from the sale are a countable asset except to the extent the proceeds are used to purchase another residence within the same calendar year as the year in which the sale occurred. VA will not subtract from a claimant’s assets the amount of any mortgages or encumbrances on a claimant’s primary residence.
If the residence is sold within the three-year look-back period, the net proceeds can be used to purchase another home of equal or greater value OR to purchase other items or services without falling into the penalty period. In cases where the residence is sold after pension is in effect and the claimant spends down the proceeds before December 31st or purchases another home of equal or more value before December 31st, pension will remain unaffected.
Personal effects. Value of personal effects suitable to and consistent with a reasonable mode of life, such as appliances and family transportation vehicles.
Look-Back on Asset Transfers
The “look-back period” refers to the 36-month period immediately preceding the date on which VA receives either an original pension claim or a new pension claim after a period of non-entitlement. This look-back period does not include any date before October 18, 2018, or 30 days after September 18, 2018, the date the new VA rules were published in the Federal Register.
Penalty Periods
The “penalty period” means a period of non-entitlement for VA pension benefits due to the transfer of an asset.
Penalty periods and calculations. When a claimant transfers an asset during the look-back period, the VA will assess a penalty period, not to exceed 5 years. However, in calculating penalty periods, the VA will disregard asset transfers made before October 18, 2018.
The length of the penalty period is calculated by dividing the value of the transferred asset by the monthly pension rate for a veteran in need of aid and attendance with one dependent that is in effect as of the date of the pension claim, currently $2,169.00. The result is the number of months during which VA will not pay pension benefits. The penalty period begins on the first day of the month that follows the last asset transfer. Only the portion of assets that would make the net worth exceed $123,600 are subject to penalty.
Example of penalty period calculation. VA receives a pension claim in November 2018. The claimant’s net worth is equal to the net worth limit of $123,600. However, the claimant transferred assets totaling $10,000 on August 20, 2018, and September 23, 2018. Therefore, the total asset amount is $10,000, and the penalty period begins on October 1, 2018. Assume the monthly pension rate for a veteran in need of aid and attendance with one dependent in effect in November 2018 is $2,000. The penalty period is $10,000/$2,000 per month = 5 months. The fifth month of the penalty period is February 2019. The claimant may be entitled to pension effective February 28, 2019, with a payment date of March 1, 2019, if other entitlement requirements are met.
Transfers can be cured in whole or in part, provided that some or all assets were returned to the claimant before the date of claim or within 60 days after the date of VA’s notice to the claimant of VA’s decision concerning the penalty period. If assets are returned to the claimant, VA will recalculate or eliminate the penalty period. For this exception to apply, VA must receive the evidence not later than 90 days after the date of VA’s notice to the claimant of VA’s decision concerning the penalty period.
Medical Expense Deductions from Income
Medical expenses for VA needs-based benefit purposes are payments for items or services that are medically necessary; that improve a disabled individual’s functioning; or that prevent, slow, or ease an individual’s functional decline. Medical expenses may be deducted by the VA from countable income.
Medical expenses may include the following payments:
- Care by a health care provider. Payments to a health care provider for services performed within the scope of the provider’s professional capacity are medical expenses.
- Medications, medical supplies, medical equipment, and medical food, vitamins, and supplements.
- Adaptive equipment. Payments for adaptive devices or service animals, including veterinary care, used to assist a person with an ongoing disability are medical expenses.
- Transportation expenses. Payments for transportation for medical purposes, such as the cost of transportation to and from a health care provider’s office by taxi, bus, or other form of public transportation are medical expenses. The cost of transportation for medical purposes by privately owned vehicle (POV), including mileage, parking, and tolls, is a medical expense.
- Health insurance premiums. Payments for health, medical, hospitalization, and long-term care insurance premiums are medical expenses. Premiums for Medicare Parts A, B, and D and for long-term care insurance are medical expenses.
- Smoking cessation products. Payments for items and services specifically related to smoking cessation are medical expenses.
- Institutional care and in-home care. Payments to hospitals, nursing homes, medical foster homes, and inpatient treatment centers (including inpatient treatment centers for drug or alcohol addiction), including the cost of meals and lodging charged by such facilities, are medical expenses. Also, payments for assistance by an in-home attendant are medical expenses.
The new VA regulations as published in the Federal Register today are attached here –
An excellent article describing the changes to the VA Rules published by ElderLawAnswers follows:
VA Establishes Asset Limits and Transfer Penalties for Needs-Based Benefits
The Department of Veterans Affairs (VA) has finalized new rules that establish an asset limit, a look-back period, and asset transfer penalties for claimants applying for VA needs-based benefits. This is a change from current regulations, which do not contain a prohibition on transferring assets prior to applying for benefits such as Aid and Attendance.
As ElderLawAnswers previously reported, the VA proposed the new regulations in January 2015. Three years later, after receiving more than 850 comments, the VA has finally published the final regulations, which are similar, with one exception, to the proposed regulations.
In order to qualify for benefits under the new VA regulations, which go into effect October 18, 2018, an applicant for needs-based benefits must have a net worth equal to or less than the prevailing maximum community spouse resource allowance (CSRA) for Medicaid ($123,600 in 2018). Net worth includes the applicant’s assets and income. For example, if an applicant’s assets total $117,000 and annual income is $9,000, the applicant’s net worth is $126,000. The net worth limit will be increased every year by the same percentage that Social Security is increased. The veteran’s primary residence (even if the veteran lives in a nursing home) and the veteran’s personal effects are not considered assets under the new regulations. If the veteran’s residence is sold, the proceeds are considered assets unless a new residence is purchased within the same calendar year.
The VA has also established a 36-month look-back period and a penalty period of up to five years for those who transfer assets for less than market value to qualify for a VA pension. The look-back period means the 36-month period immediately before the date on which the VA receives either an original pension claim or a new pension claim after a period of non-entitlement. There is an exception for transfers made as the result of fraud, misrepresentation, or unfair business practices and transfers to a trust for a child who is not able to self-support.
The penalty period will be calculated based on the total assets transferred during the look-back period if those assets would have put the applicant over the net worth limit. 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. 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).
Any penalty period would begin the first day of the month that follows the last asset transfer, and the divisor would be the applicable maximum annual pension rate in effect as of the date of the pension claim. The penalty period cannot exceed five years, a change from the 10-year maximum in the proposed regulations.
The rules also define and clarify what the VA considers to be a deductible medical expense for all of its needs-based benefits. Medical expenses are defined as payments for items or services that are medically necessary; that improve a disabled individual’s functioning; or that prevent, slow, or ease an individual’s functional decline. Examples of medical expenses include: care by a health care provider, medications and medical equipment, adaptive equipment, transportation expenses, health insurance premiums, products to help quit smoking, and institutional forms of care.
As noted, the rules become effective on October 18,2018.
For additional information concerning VA compensation and pension benefits, visit:
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