Background:

The VA offers a valuable benefit to wartime veterans through Aid & Attendance, i.e., those who served even 1 day in a time of war and served at least 90 days in one of the branches of the service.  The veteran must also have not received a dishonorable discharge. If the veteran is age 65, and the veteran or their spouse can receive assistance in daily living. This might include things such as bathing, dressing, feeding, or toileting or is blind, in a nursing home, etc.  They may qualify for a benefit that could exceed $26,000 per year, tax-free.

Similarities with Medicaid

Like qualifying for Medicaid, the applicants must meet certain financial tests. With Medicaid, under the Deficit Reduction Act (DRA), there’s a penalty if the client gives away assets to get below that asset limit. For Medicaid purposes, there’s a 60-month look-back from the date of the Medicaid application.  If you make an uncompensated transfer during that period, there are penalties. Up until now, there has been no look-back or transfer penalty for VA Aid & Attendance benefits purposes. In other words, until now, the client could give all their assets away today and be ready to qualify for Aid & Attendance tomorrow.

New Regulations

Under the regulations, set to go into effect on October 18^th, this changes. Here’s a link to the Proposed Regulations. Here’s a link to how they are modified after the comment period. Beginning October 18, there’s a new limit which is equal to the maximum Medicaid Community Spousal Resource Allowance (CSRA) of $119,220, as adjusted for inflation. The applicant’s total assets and income are combined and the applicant doesn’t qualify if their combined assets and income are above the maximum CSRA figure. At least the applicant’s residence does not count in this calculation.

If the client divests themselves of assets in an uncompensated transfer, there’s a penalty. There’s a look-back period of 36-months from the date of the application to determine if uncompensated transfers were made during that period. If there are uncompensated transfers during the look-back period, there would be a penalty period of up to 5 years.

Transfers prior to effective date of 10.18.2018

However, these divestment rules don’t apply to transfers made prior to October 18, 2018. So, if you are veteran and think you may need assistance now is the time to act.  You can qualify without a penalty period. For example, you could give all of you assets in excess of the CSRA limit to their children or others and qualify the next day. As long as the transfers are complete prior to October 18, there would be no penalty period for the transfers.  Please speak to an attorney about your specific situation.

Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
www.aaepa.com

Director of Education, American Academy of Estate Planning Attorneys