Aid and Attendance Asset Limits Change in October, 2018

The Department of Veterans Affairs (VA) recently changed the rules (with only one month’s notice to implement the change!) that make it more difficult to qualify for the VA’s Aid and Attendance long-term care benefits. The rules establish an asset limit, a look-back period, and asset transfer penalties for claimants applying for VA pension benefits that require a showing of financial need. The principal such benefit for those needing long-term care is Aid and Attendance.

The VA offers Aid and Attendance to wartime veterans (or their spouses) who are in nursing homes, assisted living, independent living, or those who live at home that need help at home with everyday tasks, called the activities of daily living, like dressing or bathing. Aid and Attendance provides money to those who need assistance.

Up until October 17, 2018, to be eligible for Aid and Attendance a veteran (or the veteran’s surviving spouse) must meet certain income and asset limits. The asset limits weren’t specified, but depended on assets, income, age, and health. Up until October 17, 2018 there were no penalties if an applicant divests him, or herself of assets before applying. That is, before now you could transfer assets out of your name over the VA’s limit before applying for benefits and the transfers would not affect eligibility.

As of October 18, 2018, this is no longer true. The new regulations set a net worth limit of $123,600, which is the current maximum amount of assets (in 2018) that a Medicaid applicant’s spouse is allowed to retain. For the new VA rules and regulation, the $123,600 number will include both the applicant’s assets and income. The number is indexed to inflation, and will increase over time, as inflation increases. An applicant’s house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home.

The regulations also establish a three-year look-back provision. Applicants will have to disclose all financial transactions, especially transactions that divest an applicant of assets, for three years before the application. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period that can last as long as five years. This penalty is a period of time during which the person who transferred assets is not eligible for VA benefits. There are some exceptions to the penalty period, such as fraudulent transfers and for transfers to a trust for a child who is unable to “self-support.”

Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR) for a veteran with one dependent in need of aid and attendance. For example, assume the net worth limit is $123,600 and an applicant has a net worth of $115,000. The applicant transferred $30,000 to a friend during the look-back period. If the applicant had not transferred the $30,000, his net worth would have been $145,000, which exceeds the net worth limit by $21,400. The penalty period will be calculated based on $21,400, the amount the applicant transferred that put his assets over the net worth limit (145,000-123,600).

The new rules go into effect on October 18, 2018. If you managed to move assets out of your name prior to that date, the VA will disregard asset transfers and not count them against the veteran. Any planning for VA Aid and Attendance benefit will now need to include pre-planning to account for a look back period and penalty transfer period, so that veterans can get the benefit as soon as they can.  As methods of planning change and evolve, veterans will need to keep up with the new changes, and it becomes important to deal with a professional who knows the new rules, like an experiences estate planning attorney.

To read the new regulations, click here.

For more information about veterans’ benefits, click here.