The Department of Veterans Affairs (VA) recently enacted changes to their non-service connected pension benefit eligibility rules. These changes will take effect on October 18, 2018. The official rules can be viewed at https://www.federalregister.gov/documents/2018/09/18/2018-19895/net-worth-asset-transfers-and-income-exclusions-for-needs-based-benefits, but here are some of the highlights:
- A “bright-line” net worth limit is now in place. For 2018, that limit is $123,600. This amount will be determined considering the claimant’s total countable assets and annual income. This clearly definable limit was created to provide determinability, consistency and uniformity for claimants during the application process.
- The VA will now be implementing a three (3) year look-back and penalty period. The VA will determine whether the claimant made any transfers for less than fair market value for three years immediately preceding the application for benefits. If they did, they will be penalized, beginning the month after the transfer occurred. The penalty will be calculated using the Maximum Annual Pension Rate (MAPR) “in effect on the date of the pension claim at the aid and attendance level for a veteran with one dependent,” which is currently $2,169.
- Annuities can no longer be used to decrease net worth for the purpose of benefits eligibility. Any assets moved into an annuity to help spend down net worth will now be penalized and factored into the three-year look-back period if the annuity is incapable of being liquidated. The monthly payments from the annuity will also be counted as income. Additionally, if the annuity can be liquidated, then the total annuity amount will be included in total countable assets.
- An assumption has been put into place that, “in the absence of clear and convincing evidence showing otherwise, as asset transfer made during the look-back period was for the purpose of decreasing net worth to establish pension entitlement.” In other words, the only allowable way to spend down assets is to spend them on items or services that are purchased at fair market value.
- Exemptions for a claimant’s primary residence are limited to those with a residential lot area of up to two acres total. A residential parcel in excess of two acres may be excluded only if the excess acreage is considered not marketable, not accessible, or if it has zoning restrictions that prevent its sale.
- The VA changes include new or revised definitions for certain terms. For example, the VA calculates a claimant’s income for VA purposes as total income less unreimbursed medical expenses. This is considered the claimant’s “income for VA purposes” or IVAP. In the upcoming changes, the VA defines “medical expenses” as unreimbursed payments for items or services that are medically necessary; that improve a disabled individual’s functioning; or that prevent, slow, or ease an individual’s functional decline. Additionally, the VA also provides specific definitions for Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs) and expands the list of activities considered as ADLs to include ambulating within the living area. Finally, the VA defined “custodial care” to mean regular assistance with two or more ADLs, or regular supervision because an individual with a physical, mental, developmental, or cognitive disorder requires care of assistance on a regular basis to protect the individual from hazards or dangers incident to the claimant’s daily environment.
Pursuant to these new regulations, there will be many changes to the established planning strategies for VA pension benefit eligibility. If you are a veteran or the spouse of a veteran and are considering an application for VA benefits, give us a call at (810) 229-0220 – we’ll be happy to discuss these changes and how they affect you!
Lisa H. Beatty