Historically, the Veterans Administration (VA) Pension benefit known as “Aid and Attendance” has been a well kept secret . However, for those who have served in the military (or whose deceased spouse served in the military) during a time of war and meet certain other financial and need criteria, it can provide substantial financial assistance. The benefit is available to a person who either:
- requires the regular aid of another person to perform everyday functions (bathing, eating, dressing, etc.),
- is bedridden
- is a patient in a nursing home, or
- is blind or nearly blind.
Yet due to a misunderstanding of the income limitations associated with the benefit, only a small number of those individuals otherwise eligible for the benefit, ever apply. This misguided belief typically occurs because potential applicants often fail to realize that in determining eligibility, all unreimbursed (out-of-pocket) medical expenses are deducted from gross income.
Although there is no specific asset limitation, assets must also be at modest levels (generally below $80,000 but often lower) in order to be approved for the benefit. But here’s the hook. Unlike the Medicaid rules that subject certain asset transfers (gifts to your children or to a trust within the five year period preceding application), to a substantial penalty, there is currently no such penalty on transferring assets prior to applying for needs-based benefits, such as Aid and Attendance.
But the eligibility rules may be changing. Recently, for example, the VA in an apparent attempt to circumvent the inability of Congress to pass a relevant bill, has introduced changes to the current law that would penalize transfers made within a 36-month period prior to application and impose a penalty period of up to 10 years for those who dispose of assets in order to qualify for a VA pension. The penalty period would be calculated based on the total assets transferred during the look-back period that exceed a newly proposed net worth limit.
The amount of a claimant’s net worth would be determined by adding the claimant’s annual income to his or her assets. The VA would not consider a claimant’s primary residence, including a residential lot area not to exceed two acres, as an asset. But if the residence is sold, proceeds from the sale would be assets unless used to purchase another residence within the calendar year of the sale. Any penalty period would begin the first day of the month that follows the last asset transfer, and the divisor would be the applicable maximum annual pension rate in effect as of the date of the pension claim.
The proposed rule also defines and clarifies what the VA considers to be a deductible medical expense for all of its needs-based benefits, and proposes statutory changes pertaining to pension beneficiaries who receive Medicaid-covered nursing home care.