Is A Claim For VA Aid and Attendance Benefits Properly Denied Due to Excess Resources When The Applicant Owns An Annuity?

Following is an exchange posted on a electronic bulletin board devoted to the discussion of issues involving pension and compensation claims submitted to the Department of Veterans Affairs (VA):

Question: My client applied for pension benefits from the VA. The client was deemed medically qualified for VA Aid and Attendance benefits, but denied pension benefits based upon excess resources. The reason for the denial: the VA counted the principal amount of an annuity as an available resource even though the annuity was in pay status. I can’t figure it out. Any ideas out there to get this corrected in an expedited manner?

Answer from annuity salesman: I would be willing to help you. Is the annuity an immediate annuity, or is it a tax-deferred annuity? As you may be aware, an immediate annuity is considered by the VA to be an income stream. Because the entire value of the annuity is scheduled to be paid out over the life expectancy of the annuitant, the VA considers the annuity as income rather than a resource, and no cash value exists. On the other hand, with a tax-deferred annuity, the annuity retains a cash surrender value which is available to the applicant; thus, it is considered to be a countable resource. Some tax-deferred annuities appear to be immediate annuities because the owner/annuitant/payee may receive monthly payments, but the payments consist only of interest, not principal.

Answer from an accredited Veterans attorney: Assuming the client owns an immediate annuity, you must get a letter from the annuity agent or company that explains that the annuity is actuarially sound and, as a result, has no cash surrender value. Then, you must appeal the denial by filing a Notice of Disagreement and asking for reconsideration. Submit the letter from the annuity company explaining that the annuity has no cash surrender value and, thus, no value for purposes of determining net worth. Submit a letter brief in which you provide citations to the section of the VA adjudicators manual that states that non-liquid assets have no value.