Three and a half years after announcing draft rule changes, The Department of Veterans Affairs (VA) has finalized new rules, effective October 18, 2018, that establish, among other things, a new asset limit test, a novel look-back period and penalties on claimants applying for VA needs-based benefits who are found to have violated these rules.
The new rules apply to what is known as the Improved Pension program, commonly referred to as “Aid and Attendance” and “Housebound” benefits. These benefits are available to certain war time veterans and their surviving spouses if they meet the service and asset and income based eligibility requirements. They are commonly sought to provide assistance for persons seeking in-home and assisted living facilities care. For most persons needing care at the skilled nursing level, the Medi-Cal program still offers the most generous benefits.
Under the new VA rules, an applicant for the Improved Pension benefit must have a net worth equal to or less than the current Medi-Cal asset threshold, known as the community spouse resource allowance, or CSRA which is $123,600 in 2018, but tied to an inflation standard. However, unlike Medi-Cal which measures only “countable” assets in the CSAR, the VA rules includes the applicant’s assets and income. For example, if an applicant’s countable assets total $80,000 and has an annual income of $50,000, the applicant’s net worth for VA eligibility purposes is $130,000, making them ineligible for the Pension benefit.
Like Medi-Cal, there are some exempt, or noncountable, assets such as veteran’s primary residence (even if he or she is living in a nursing home), a vehicle and the veteran’s personal personal property. However, there are acreage limitations on the personal residence.
If the veteran’s home is sold, the proceeds will remain exempt if a new home is purchased within the same calendar year. Accordingly, contemplated sales should be scheduled at the beginning of the calendar to maximize the time to obtain a new how. A sale in December would be problematic.
Under the new rules, the VA has for the first time imposed a 36-month look-back period for those who transfer assets for less than fair market value to qualify for a VA pension. While there are some exceptions, the penalty period will be calculated based on the total assets transferred during the look-back period if those assets would have put the applicant over the net worth limit. For example, consider the 2018 asset cap of $123,600 and an applicant who has a calculated net worth of $100,000. If the applicant transferred $25,000 to a third party during the look-back period, it would be counted making his or her net worth $125,000, which exceeds the net worth limit making him or her ineligible and imposing a penalty period which cannot exceed five years.
The foregoing is simply a summary of the key changes in the new VA rules which we believe are ill-advised and mean-spirited as they will impose hardships on needy and vulnerable elderly veterans in need of care. However, as before, we will do our best to assist our clients to maximize the planning opportunities that are still available under the new rules.