Sen. Ron Wyden (D-OR) has introduced legislation that would require the Secretary of Veterans Affairs (VA) to impose asset-transfer rules on pension applicants. The bill, S. 3270, follows a U.S. Government Accountability Office (GAO) report that found abuses among a small group of attorneys and financial planners who help veterans transfer assets in order to qualify for the VA pension benefits. In its report, the GAO recommended that Congress consider establishing look-back and penalty periods for pension claimants who transfer assets, similar to the rules for Medicaid applicants.
The GAO unveiled its findings in testimony at a June 6, 2012, Senate hearing, where lawmakers also heard from a VA official, veterans advocates and a woman whose father was victimized by one of the unscrupulous “pension poachers,” as Senate aging committee chair Sen. Herb Kohl (D-WI) dubbed them.
About 200 organizations are marketing financial and estate planning services to help pension claimants with excess assets qualify for the VA’s Aid and Attendance and other pension benefits, the GAO concluded after a year-long investigation.
“While these organizations may be legally entitled to operate,” said witness Lori Perkio of the American Legion, “it is unclear as to whether or not they are truly serving the best interests of the veterans and their families.” In Florida, for example, Perkio claimed that “American Legion service officers have run across a growing number of lawyers specializing in elder law who contact veterans directly through assisted living facilities (ALFs) with promises of how to divert income and assets to qualify for VA pension. Many of these attorneys do not provide follow up assistance with the ultimate pension claims process.”
Posing as the children of an 86-year-old veteran with $300,000 in countable assets who was trying to qualify for a pension, GAO investigators contacted 19 firms and were told they could qualify as long as they put their money in trusts or annuities, for which the firms would charge fees. Two organization representatives said they helped pension claimants with substantial assets, including millionaires, obtain VA’s approval for benefits.
The GAO found that some organizations were providing products and services such as annuities that were potentially unsuitable for the elderly because the funds would be unavailable during their expected lifetimes without high withdrawal fees.
The investigation also raised questions about whether veterans and their families are being informed of the Medicaid implications of asset transfers. “According to several attorneys we spoke with,” the report states, “some organization representatives are unaware or are indifferent to the adverse effects on Medicaid eligibility of the products and services they market to qualify for the VA pension.”
In addition, the GAO heard concerns about misleading marketing strategies used by some of the companies. Again, “several attorneys” told GAO investigators that some organization representatives are leading potential pension claimants and their family members to believe they are veterans’ advocates working for a nonprofit organization, or are endorsed by VA.
Investigators spoke with "an elder law attorney" who said that many attendees at assisted living facility presentations may have Alzheimer’s disease or dementia and are not in a position to make decisions about their finances.
Apparently as a strategy to prevent such abuses, the GAO concludes by asking Congress “to consider establishing a look-back and penalty period for pension claimants who transfer assets at less than fair market value prior to applying for pension benefits, similar to other federally supported means-tested programs.”
Wyden Wastes No Time Introducing Bill
Citing abuses uncovered by the GAO, Sen. Wyden introduced his bill on the same day as the hearing, although the legislation's text is not yet available. The bill has two Democratic and two Republican co-sponsors. One, Sen. Richard Burr (R-N.C.), is a ranking member of the Senate Committee on Veterans' Affairs.
“If things continue as they are, and people see this program as a magnet for rip-offs and waste, I believe that in this financial climate support for the program will fall apart,” said Wyden. “I want to preserve this for people who need it.”
In an article on the GAO report, the New York Times noted that a senior official at the VA said the department is drafting new regulations that would clarify the types of asset transfers that might disqualify a pension applicant.
To read the GAO’s full report, click here.
To read the GAO's testimony at the Senate hearing, click here.
For the New York Times article on the GAO's findings, click here.
For more on the Senate hearing, including transcript and video, click here.
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