On September 18, 2018 the long-awaited final rules were released by the Department of Veterans Affairs (VA) regarding pension benefits. The VA Pension is a needs-based benefit for Veterans that served during a period of wartime and spouses of deceased Veterans. The new VA rules dramatically change the current asset and income qualification rules for Veterans applying for pension benefits.
There are several changes to the pension benefit qualifications; however, the two changes that I want to highlight are (1) the imposition of a look-back period and penalty for gifts and uncompensated transfer; and, (2) a change to the requirements for income and assets, which the VA refers to as “net worth”.
Three Year Look-Back and Penalty for Gifts for VA Pension Benefits
One of the biggest changes under the new rules is the look-back period, and an imposition of a penalty for gifts or uncompensated transfers of assets. The VA will now have a 36 month look-back at the time of application. Currently, the VA allows gifts to qualify for benefits and does not penalize a Veteran who has engaged in gifting in the past. Beginning October 18, 2018, if the Veteran transfers an asset that is included in their “net worth” calculation for less than fair market value, a penalty will be imposed on the Veteran provided the amount transferred exceeded the net worth limit. Under the new rules, a purchase of an annuity with assets that are considered part of the Veteran’s “net worth” will also be considered a transfer and subject to the penalty rules unless the Veteran retains the ability to liquidate the annuity.
The penalty period imposed on the Veteran can be up to five (5) years. The penalty period is calculated by using the maximum pension rate and dividing the value of the gift made.
Net Worth Limit for VA Pension Benefits
Under the new rules, the VA will impose a limit on net worth equal to the maximum community spouse resource allowance for Medicaid. In 2018 this number is $123,600.00, this amount would increase by the same percentage as the cost-of-living increase for Social Security benefits. The VA defines “net worth” as all assets and annual income of the applicant. The assets of the Veteran also include the assets of the Veteran’s spouse. Where a surviving spouse of a Veteran is applying, only the assets of the spouse will be counted.
There are assets that are specifically excluded from the “net worth” calculation, some of those exclusion includes the primary residence if the Veteran is living in the house, vehicles, and personal property.
There are ways that the Veteran’s net worth, or the net worth of the surviving spouse of the Veteran, can be reduced. This includes, but is not limited to, the purchase of items for the Veteran or the spouse of the Veteran for fair market value. The annual income of the Veteran can be reduced by unreimbursed medical expenses.
The new rules go into effect on October 18, 2018, therefore if you are currently planning to apply for VA pension benefits there is a great advantage to applying prior to the effective date. For more information, or to read the new changes please click here.
Contact OWM Law at 610-323-2800 to find out how these new rules will impact you and what you should do to apply for pension benefits prior to October 18, 2018.
— Written by Rebecca A. Hobbs, Esq., CELA*
*Certified as an Elder Law Attorney by the National Elder Law Foundation as authorized by the Pennsylvania Supreme Court.
DISCLAIMER: The contents of this blog are not legal advice, and are not to be used for that purpose. If you are faced with a legal matter, you should contact a lawyer immediately in order to ensure that you are protected.