October 1, 2018
VA Establishes Asset Limits and Transfer Penalties for Needs-Based Benefits that Take Effect October 18, 2018
Some very important Veterans benefits such as Aid and Attendance are needs-based. For years there has been some ambiguity in terms of the specifics on establishing sufficient need for eligibility. In an effort to provide clarity, the Department of Veterans Affairs (VA) has finalized new rules that establish an asset limit, a look-back period, and asset transfer penalties for claimants applying for VA needs-based benefits. This is a change from current regulations, which do not contain a prohibition on transferring assets prior to applying for benefits.
In order to qualify for benefits under the new VA regulations, an applicant for needs-based benefits must have a net worth equal to or less than the prevailing maximum community spouse resource allowance (CSRA) for Medicaid ($123,600 in 2018). Net worth includes the applicant’s assets and income. For example, if an applicant’s assets total $110,000 and annual income is $16,000, the applicant’s net worth is $126,000. The net worth limit will be increased every year by the same percentage that Social Security is increased. The veteran’s primary residence (even if the veteran lives in a nursing home) and the veteran’s personal effects are not considered assets under the new regulations. However, if the veteran’s residence is sold, the proceeds are considered assets unless a new residence is purchased within the same calendar year.
The VA has also established a 36-month look-back period and a penalty period of up to five years for those who transfer assets for less than market value to qualify for a VA pension. The look-back period means the 36-month period immediately before the date on which the VA receives either an original pension claim or a new pension claim after a period of non-entitlement. There are some exceptions, including transfers to a trust for a child who is not able to self-support.
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.
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 for a veteran in need of aid and attendance with one dependent that is in effect as of the date of the pension claim. The penalty period cannot exceed five years, a change from the 10-year maximum in the proposed regulations.
The VA also clarified what it considers to be a deductible medical expense for all of its needs-based benefits. Medical expenses are defined as payments for items or services that are medically necessary; that improve a disabled individual’s functioning; or that prevent, slow, or ease an individual’s functional decline. Examples of medical expenses include: care by a health care provider, medications and medical equipment, adaptive equipment, transportation expenses, health insurance premiums, products to help quit smoking, and institutional forms of care.
These new rules take effect October 18, 2018
