In October of 2018, the Department of Veterans Affairs (VA) put into effect new rules and requirements regarding eligibility for VA needs-based benefits and pensions, including Aid and Attendance benefits. Veterans who were receiving pensions prior to October 18, the effective date of the changes, will not be affected by the rule changes, unless their eligibility terminates and they need to reapply for benefits. Administrative determinations will be made regarding pension applications that were pending as of the rules’ effective date.
Why the changes? Because VA pensions (such as Aid and Attendance, housebound, survivors and basic veterans pensions) are need based, the VA felt the need to clarify for veterans and their loved ones how need is determined and to make the program more consistent. The rule changes are an attempt to clean up the often-confusing definitions and financial criteria that were previously in place. It is hoped that the updated rules will also serve to expedite decisions regarding benefits.
It is important to note that no changes have been made to the minimum active duty requirements or requirements for wartime service. The updates are centered around financial requirements to qualify for benefits, as well as definitions of key concepts.
Prior to the effective date of the new eligibility rules, pension eligibility was determined using a household income cap. The cap determined not only whether a veteran was eligible to receive a pension, but how much he or she could receive. However, there was no maximum amount of assets (as opposed to income) that an applicant could have before losing eligibility.
As a result, an applicant with little countable income, but significant assets, might be approved for pension, while one with few assets, but slightly too much income, might be denied. In order to avoid inconsistent outcomes like this, the VA is now determining an applicant’s eligibility for benefits using his or her net worth.
Medicaid uses a figure called the maximum community spouse resource allowance (CSRA). The CSRA number was established by Congress in order to prevent the non-institutionalized (community) spouse of an institutionalized person from becoming impoverished.
The VA has adopted the use of the CSRA as a net worth ceiling for eligibility for need-based benefits. The maximum CSRA as of the new rules’ effective date was $123,600. The VA’s net worth limit will have an annual cost-of-living adjustment (as the CSRA and Social Security benefits do) in order to adjust for inflation.
Under the new eligibility rules, an applicant for need-based VA pension and benefits must have a net worth that is equal to, or less than, the maximum CSRA. Net worth for the purposes of this calculation is the total of an individual’s assets plus their annual income. This net worth limit will have no hardship exceptions.
Net worth is calculated when an applicant makes a new pension claim or a secondary claim that follows a period during which the applicant is not entitled to benefits. The VA will also recalculate net worth when there is a request to establish a new dependent. In situations in which the VA receives information suggesting a change in an applicant’s net worth, it may also recalculate net worth. A common scenario in which this might happen is when the applicant sells real estate, which triggers a reporting requirement on tax forms.
The primary residence may include a residential lot no larger than two acres. Land exceeding two acres would be included in asset calculations unless it is not marketable. However, proceeds from the sale of residential property will be counted as assets unless they are used to buy another residence within the same calendar year. If a claimant sells a house in November, for example, he or she would have to use the proceeds to buy another residence before December 31 of that year.
A claimant’s primary residence is not counted as an asset even if he or she is currently living in a nursing home or receiving care in the home of a relative. However, if the claimant decides to rent out the primary residence during his or her absence, the rental income does count toward the net worth calculation. All other real property owned by the claimant are considered assets for purposes of net worth, but mortgages, liens, and other encumbrances are deducted from their value. A $250,000 condo with a $100,000 mortgage would show a value of $150,000 in a net worth calculation.
Unlike Medicaid, which has long had in place a five year “look-back” period when evaluating an applicant’s eligibility for benefits, the VA has not had any such period—until now. The VA now has a three year look-back period. It will scrutinize for any asset transfers during this period that might disqualify a claimant from receiving benefits.
If, within three years of applying for benefits, a claimant transfers an asset for less than its fair market value, and that asset would have put the claimant over the net worth limit, he or she may suffer a penalty. The portion of the value of the transfer that exceeded the net worth limit would trigger a period of ineligibility for benefits. The greater the amount of the transferred value that exceeds the net worth cap, the longer the period of ineligibility will be. The VA will not consider transfers that took place before the effective date of the new rules. Claimants may also have a brief time after a penalty period is imposed in which to try to correct their ineligibility by reclaiming the transferred assets.
The new VA pension eligibility rules may provide clarity, but they may also make it more difficult for some people to qualify for benefits. If you have questions about the new Aid and Attendance rules, we invite you to contact Gudorf Law to schedule a consultation.
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