Estate Planning For VA Pension Benefits By Transferring Assets

(The following is part of a discussion, taken from a listserv, or electronic bulletin board, concerning benefits available for veterans, their dependents and survivors from the Department of Veterans Affairs (“VA)”.)

Question: We just had a veteran denied for pension benefits with Aid and Attendance supplement from the Department of Veterans Affairs (“VA A&A Benefits”) because the veteran transferred assets three (3) months or so before applying for benefits.

The denial states as follows:  “We reviewed the evidence and determined that your net worth is sufficient to meet your living expenses at this time. Based on the information provided, you reported that you gifted cash assets prior to your pension application. VA’s pension program is an income based program that is intended to give claimants a minimum level of financial security. It is not a benefit to protect or build up the beneficiary’s estate for the benefit of heirs. Based on this information, we are denying your pension.”

Has this happened to anyone else?  How do you suggest we proceed?  Appeal?  Is there a look back period or disqualification period applicable when an applicant for VA A&A Benefits transfers assets?

Answer: Currently, there is no look-back period in the law when determining eligibility for VA A&A Benefits. As long as the claimant does not retain any rights of ownership or control, assets are counted from the date of entitlement (that is, the date that the VA receives the first intent to file a claim; i.e., either an informal request or an application, which ever is received first).  In a case like this, the only option is to appeal by filing a Notice of Disagreement.  I personally would cite law and request Regional Office review.

For example, see M21-1MR, Part V, subpart iii, chapter 1, section I (65) concerning jointly-owned assets, but same principle applies for transfers:

f. Example 3: Partial Interest in Property –

A veteran and an adult (non-helpless) child who lives in the same household are joint owners of a $10,000 CD and were joint owners before the date that the veteran became entitled to pension.

Result: Each owner has an undivided one-half interest in the CD. The value of the CD is $5,000 for net worth purposes and only one-half of the interest earned is counted as income in determining the veteran’s income for [VA pension eligibility purposes].

Listserv Participant Comment: My understanding of the law is that transfers of assets must be disclosed only when the applicant has retained any rights of ownership or control in the transferred assets. Others may disagree. Based upon my understanding, I simply state, in the Remarks section of the application for pension benefits, that no assets have been transferred in all cases in which a completed gift has been made.