The Department of Veterans Affairs (VA) has just amended its regulations governing veterans’ eligibility for VA Aid and Attendance (A&A) benefits, a needs-based benefit program. The amended regulations establish new requirements for evaluating net worth and asset transfers for A&A and identify which medical expenses may be deducted from countable income for VA’s needs-based benefit program.
This rule is effective October 18, 2018, a little over two weeks away!
What is VA Aid and Attendance and who is eligible for this benefit?
If you are a veteran overwhelmed with the high cost of long-term care, such as paying for assisted living facilities, home care health aids, or adult daycare, the Veterans Aid and Attendance (A&A) benefit could be the solution to help offset these rising care costs. A wartime veteran or their surviving spouse with limited income and assets may be eligible to receive a non-service connected pension.
What do the new rules mean?
Some of these new rules will now make it much more difficult for Vets to qualify. These rules were three years in the making. Here are some highlights of the new rules:
Net Worth: Under the old rules, a Veteran could only qualify for A&A if their net worth met VA regulations, which were vague and uncertain, resulting in inconsistent decisions and often denials. By contrast, the new rules adopt a “bright line” test to improve consistency. The net worth threshold will now be coupled with the MassHealth’s CSRA limit for a married couple, currently $123,600 (in 2018). This will be the net worth rule whether the Veteran is married or single. This figure will adjust annually with inflation. However, unlike MassHealth, the VA will include in this number both non-exempt assets as well as the Veteran’s annual income (after adjusting out qualifying medical expenses).
Transfer Penalties: Under the old rules, a Veteran could transfer away assets to adult children, an irrevocable trust or purchase an irrevocable immediate annuity, and immediately bring down his net worth to qualifying levels. There was no transfer penalty. This planning option will soon be gone! Once the new rules become effective, any excess net worth transferred away within three years of application will trigger a penalty period, during which time the Veteran or Surviving Spouse will be ineligible for A&A.
Purchase of Annuities Now Eliminated: Once the new rules become effective, a Veteran will no longer be able to purchase an irrevocable annuity to convert excess net worth into a stream of income. Such a purchase will be considered a transfer of assets and will trigger a transfer penalty.
Medical Expense Deduction Has Become More Liberal: Some good news: the new rules expand the definition of medical expenses that will be allowed as a deduction from the Veteran’s income, for purposes of both reducing his net worth and increasing his A&A. It should now be easier to qualify expenses incurred for home care, even if provided by an adult child, as well as care in assisted living facilities.
What does this mean for you or a loved one?
The new rules become effective on October 18, 2018. Until then, the old rules apply. If a Veteran is considering applying for a VA A&A down the road, and believes he may need to transfer assets in order to qualify, he should consider doing so before October 18, because there will then be no transfer penalty even if the application is made long after that date. We at Surprenant & Beneski, P.C. urge Veterans in this situation to become proactive about learning what options for planning best suit their families, and to consider taking action before the new rules and their transfer penalties become effective.
Having said all of that, please let us stress that VA A&A planning is not for everyone. Some clients are simply not a good fit for veterans’ benefits for many reasons including the size of the estate or the tax consequences of seeking such a benefit. For wealthier clients with more assets, there are other solutions beyond VA A&A and we discuss those solutions with them. We do not want this article or these amended regulations to give the impression that everyone can or should seek VA A&A. If you are unsure which path is best for you, please come see us to discuss your options.
At Surprenant & Beneski, P.C., we are proud that we try to stay current on the regulation changes and on what the Veterans Administration is doing. We also take into account what other attorneys, including those in the National Academy of Elder Law Attorneys, are suggesting. We believe this focus provides the most protection and peace of mind for our clients. As the law evolves over the years, we encourage everyone to have their planning reviewed regularly to stay current and working properly. Plus, it would be great to see you! Call our office today at (508) 994-5200 to schedule a consultation.
References: Federal Register of September 18, 2018, announcing the new rules.
©Surprenant & Beneski, P.C. 35 Arnold Street, New Bedford, MA 02740, 336 South Street, Hyannis MA 02601 and 45 Bristol Drive, Easton, MA 02375. This article is for illustration purposes only. This handout does not constitute legal advice. There is no attorney/client relationship created with Surprenant & Beneski, P.C. by this article. DO NOT make decisions based upon information in this handout. Every family is unique and legal advice can only be given after an individual consultation with an elder law attorney. Any decisions made without proper legal advice may cause significant legal and financial problems.