As noted in the previous Part, many person who initially contact our office relating to VA benefit eligibility do not immediately qualify for them. In most cases it is because they have too many assets that the VA would count in ascertaining their availability.
However, there are numerous effective and legal strategies that can be employed to reduce one’s net worth for VA eligibility purposes.
One note of caution: There are far too many persons and entities that purport to provide assistance with VA benefit planning, some even offering “free” planning services. As with most things in life, you get what you pay for. One should be very careful before proceeding with a non-attorney planner. These individuals often hide their fees in annuities and other financial products that may or may not be appropriate. Common oversights include failing to take into consideration tax consequences and of the possible future need to apply for Medi-Cal benefits. Certain strategies that may work in VA planning may cause long periods of ineligibility for Medi-Cal benefits.
One strategy that may be used is simply to transfer assets to a third person who is not a relative living in the same dwelling as the applicant. Unlike Medi-Cal, the VA does not penalize for gratuitous transfers. However, when preserving the ability to obtain future Medi-Cal benefits is important, it is wise to work with an experienced and qualified elder law attorney who is familiar with both programs. Another potential problem with gifting of appreciated assets is possible adverse tax conequences.
A strategy that will not work is to transfer an interest in real property while retaining a life estate. The VA will continue to include the property due to the retained interest.
Another strategy is to convert assets to income, typically through the purchase of an annuity. The assets in the annuity is not counted, but the income stream is. Again, this is another area where careful consideration needs to be given to avoid future problems in obtaining Medi-Cal benefits.
WARNING: This Primer series is for educational purposes only and is only a general discussion of the topics. It is not a substitute for personalized legal advice based upon one’s individual circumstances and goals. For such advice, seek the counsel of an experienced and qualified elder law attorney accredited to practice before the VA.