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Mayhone Elder Law’s Veterans Benefits Planning

VA Announces Changes to Benefits Regulation

On Jan. 23, 2015, in an attempt to “maintain the integrity of the program,” the VA proposed sweeping changes to its regulations regarding net worth and asset transfers. On Sept. 18, 2018 the proposed rule was adopted as final and it became effective on Oct. 18, 2018. While some of the changes may be favorable to a claimant by providing some clarity and consistency, many of them may significantly impact a veteran’s eligibility for benefits and the timeline in which they will be received.

What Are The New Rules?

  • Establishing a Bright-Line Net Worth Limit

Previously, the VA did not have a clearly established net worth limit. While the VA takes into account such factors as liquidity of assets, number of dependents, and life expectancy of the claimant, there were no definitive criteria for determining whether a claimant’s resources are sufficient to meet their basic needs without the pension.

The new rule establishes a clear net worth limit, which will allow less discretion on the part of the adjudicators and provide more consistency in the decision-making process. The net worth limit is the same as the maximum annual community spouse resource allowance used for Medicaid purposes. This amount is currently $127,061 (effective 12/1/2018) and the limit would be increased at the same time and in the same manner as recipients of Social Security receive for cost-of-living adjustments.

  • Inclusion of Annual Gross Income in Net Worth

An applicant’s annual income will be added to the sum of his or her assets when determining net worth. This means that veterans with higher incomes will be permitted to save a lower amount of assets, and veterans with lower incomes will be permitted to save a larger amount of assets.

  • Exempt Assets: Primary Residence & Lot Size Limits

Additionally, a claimant’s primary residence, including a “reasonable lot area” is currently excluded as an asset for purposes of calculating net worth. The rule change defines “reasonable lot” by limiting the area to 2 acres, unless the additional acreage is not marketable. If the primary residence is sold, the VA will not include the proceeds from the sale as an asset if they are used to purchase another primary residence within the same calendar year. However, to the extent the purchase of the new residence is less than the sale price of the previous primary residence, the excess amount will be considered an asset for purposes of net worth calculations.

  • 36 Month Look-Back Period on Asset Transfers and Penalty Periods

Previously, veterans were permitted to transfer significant assets without penalty prior to applying for a pension. However, the new rule establishes a 36 month look-back period. All transfers for less than fair market value made during the 36 month look-back period are presumed to be for the purpose of decreasing net worth, unless the applicant can prove by clear and convincing evidence that the transfers were made for some reason other than to qualify for the pension benefit.

The transfer penalty applies only to “covered assets” – assets that were part of the claimant’s net worth, were transferred for less than fair market value, and would have caused the claimant’s net worth to exceed the limit for pension eligibility had they not been transferred.

The penalty period for transfers is calculated in months by dividing the transfer amount by a set divisor of $2,295 (2021). For example, if an applicant transfers $80,000.00, his or her penalty period would be 34.86 months, which would be rounded down to 34 months.

The VA has proposed a maximum penalty period of 5 years for transfers, opting to deviate from the 36 month maximum consistent with the SSI statute. The VA favored the longer maximum penalty period, indicating it would be inequitable for a claimant who transferred $25,000 to be penalized the same length of time as a claimant who transferred $1,000,000.

What is the Special Monthly Pension Benefit?

The Veterans’ Administration offers a Special Monthly Pension benefit to qualifying wartime veterans and surviving spouses of wartime veterans that is largely unknown. This Special Pension allows for veterans and surviving spouses who require the regular aid and attendance of another person to assist in eating, bathing, dressing, undressing, or taking care of the needs of nature to receive additional monetary benefits. It also includes individuals who are blind or a patient in a nursing home because of mental or physical incapacity. Independent living and assisted care in an assisted-living facility may also qualify. The additional money can help pay for care for the ailing loved one.

This is a “pension benefit” and is not dependent upon service-related injuries. This special pension benefit addresses the needs of the veterans and their surviving spouses who have non-service related disabilities and who require regular assistance with the activities of daily living.

Most people think of veterans benefits as being only for servicemen and -women who were wounded or disabled while serving in the armed forces. By and large, that is true. But—we have learned that there are substantial benefits that may be available to wartime veterans who are now senior citizens and are facing the burden of long term care due to a host of diseases such as Alzheimer’s, Parkinson’s, MS, Lou Gehrig’s Disease, and many others. In fact, the Veterans Administration estimates that millions of wartime veterans and their spouses may be eligible for Special Monthly Pension benefits, and not even be aware of it!

Wartime veterans, or their surviving spouses, become eligible for the Special Monthly Pension benefit when they are over 65 years of age, are permanently disabled and unable to work, are homebound, or need the regular aid and attendance of another—whether at home, in assisted/supportive living, or in a nursing home. The program is based on actual financial need for assistance, so there are income and asset limitations…the VA recently announced changes to the program, including a look-back period for transfers of assets for less than fair-market value. These changes take effect October 18, 2018.

The following are the VA’s defined “periods of war”:

WWII: 12/7/1941 to 12/31/1946
Korea: 6/25/1950 to 1/31/1955
Vietnam: 8/5/1964 to 5/7/1975
Persian Gulf: 8/2/1990 to present

The big question for many families will be, “What will it cost me to seek advice in this area?” Although an attorney who chooses to actually file a claim for veterans benefits must do that portion of his/her work for free, the attorney may charge the usual fees related to any estate planning, financial planning options, Medicaid, Medicare, income tax, or gift tax work, as well as the determination of the financial suitability of filing for a veterans benefit claim. No one should pay an attorney fee unless receiving a fair return on his/her investment.

Only three types of persons are authorized to provide a veteran with assistance filing a claim for veterans benefits:

  1. An attorney licensed to practice law in your state and accredited through the VA;
  2. A veterans service organization such as VFW, American Legion, Amvets, etc.;
  3. A state or county official of the Dept. of Veterans Affairs in your state.

Attorney Dennie Mayhone of Mayhone Elder Law is accredited with the VA. Various members have attended numerous intensive training sessions to learn how to help our veterans and families qualify for this important earned benefit.

Contact Mayhone Elder Law today if you think you may qualify or if you have questions about qualifying.

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