(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: Our client is the widow of a veteran with no savings or other assets who resides in an assisted living facility (ALF). The client’s income is insufficient to pay the monthly ALF costs in full, so her daughters supplement her income by paying the ALF costs that our client cannot pay. Client applied for VA Aid and Attendance Pension Benefits (A&A) to help her pay the ALF costs. The VA agreed that the widow was medically and financially eligible for A&A but found her to be ineligible because the ALF expenses are being paid by her daughters. The daughters were planning to stop paying the facility as soon as Mom was approved for A&A benefits, and to seek reimbursement from Mom from the award of retroactive A&A benefits.

The VA says that the agency will not count the surviving spouse’s ALF costs as unreimbursed medical expenses (UME) because the ALF expenses are paid by a third party. We don’t believe this is a correct interpretation of the law. What do we do now?

Answer: Only the ALF costs that the A&A applicant is actually paying him/herself is countable as UME; that has always been the law.

In the case where care costs exceed an applicant’s actual income, a claimant can personally pay whatever he/she has towards the care, which would still give the claimant the maximum pension by zeroing out the Income for VA Purposes (IVAP). A family member can then pay the difference, which would neither be declarable as UME, nor would it be declarable as income since it would be considered family maintenance (see following):

M21-1MR, Part V, Subpart iii, Chapter 1

b. Maintenance. Do not count the value of maintenance. In other words, if someone furnishes a claimant free room and board, or pays the claimant’s bills, the value of room and board or the amount of the extinguished debt is not countable.

Regular cash contributions can be considered maintenance, and not be counted as income, if the evidence establishes that

1. the donor has assumed all or part of the burden of regular maintenance of the claimant, and
2. cash contributions are used by the claimant to pay for basic necessities, such as food or housing.

Exception: Cash contributions which are sporadic or in amounts in excess of what is required for regular maintenance should be considered gifts which are countable for Improved Pension purposes.

Question: Would the VA find the situation to be less objectionable if, from the beginning of the financial arrangement, the payment of Mom’s expenses by the adult child(ren) is performed under a legally binding personal services contract and loan agreement? The loan agreement could be secured by a family equity line of credit on the Mom’s home or an unsecured promissory note. The outstanding debt to child(ren) would be paid back upon receipt of the retroactive VA pension  benefits?

Answer: This technique has been used by applicants in the past and found acceptable by the VA. But, the financial arrangement must be carefully detailed once the retroactive VA pension benefits were paid to Mom. At that time, the children would be repaid and that money could not then be used by the children to pay the claimant’s UME going forward. In addition, all of these documents need to be retained for at least 5-7 years in case the claimant is subject to a random audit.