Clients often have questions about the effect of gifts and jointly-owned property on eligibility for benefits, including Base Pension, Housebound and Aid and Attendance, from the Department of Veterans Affairs (VA). Below I’ve collected some of the federal regulations governing how gifts and joint property will affect VA pension benefits. The authorities cited show that the effect of gifts depends upon when and to whom a gift is made, and the effect of jointly-owned property is dependent upon when joint ownership was established.
The following Code of Federal Regulation (CFR) section indicates that the date on which a transfer was made; i.e. before or after date of entitlement, has no impact on the effect the transfer will have on eligibility for VA benefits:
38 C.F.R. 3.276
(b) Transfer of assets. For pension purposes, a gift of property made by an individual to a relative residing in the same household shall not be recognized as reducing the corpus of the grantor’s estate. A sale of property to such a relative shall not be recognized as reducing the corpus of the seller’s estate if the purchase price, or other consideration for the sale, is so low as to be tantamount to a gift. A gift of property to someone other than a relative residing in the grantor’s household will not be recognized as reducing the corpus of the grantor’s estate unless it is clear that the grantor has relinquished all rights of ownership, including the right of control of the property.
The following section, from the VA’s M21-1MR Compensation and Pension Manual, confirms the above CFR section:
M21-1MR, Part V, Subpart iii, Chapter 1, Section I (65)
a. Effect of Asset Transfers on Countable Income
A claimant may attempt to reduce net worth or countable income by transferring property to another person without actually giving up all rights in the property. However, no sale or gift of property to
* a member of the same household will reduce the claimant’s net worth or [Income for VA Purposes (IVAP)}, or
* a person outside the claimant’s household will reduce net worth or IVAP, unless the claimant can demonstrate that there has been an actual relinquishment of rights to the property and income from the property.
The following M21-1MR section discusses jointly-held assets:
M21-1MR, Part V, Subpart iii, Chapter 1, Section I (65)
e. Transferring a Partial Interest in Property to Person in Household Situation:
* A veteran has a $10,000 CD.
* The veteran adds an adult (non-helpless) child who lives in the same household as joint owner of the CD.
Result: The legal effect of this transaction is to give each joint owner an undivided one-half interest in the CD. The value of the CD is still $10,000 for net worth purposes and all of the interest earned by the CD is counted as income in determining the veteran’s IVAP.
Note: This is the case regardless of who reports the income from the CD for IRS purposes.
The following M21-1MR section discusses transfers made prior to date of entitlement:
M21-1MR, Part V, Subpart iii, Chapter 1, Section I (65)
f. Example 3: Partial Interest in Property – No Transfer Involved Situation:
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 IVAP.
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