There is much buzz about the long anticipated VA rule change to the improved Pension Program. These were announced in a 135 page document published in the Federal Register on September 18th. The new rules become effective October 18, 2018. Thanks to Boston attorney Harry Margolis we can give you a very short summary of the major changes. Here are some points from the Margolis summary.
• Net worth allowable – $123,600. The figure is welcomed by many vets and surviving spouses because their claims were denied for excess net worth. Some applications had been denied where the applicant had less than $10,000. However there is a bit of a trick in the number: it includes one year of income. Example: veteran and spouse have household income of $2,500 per month, which equals $30,000 per year. That means they can only have $93,600 max in cash assets.
• The second big change is that the VA added a three year look-back with a potential maximum penalty period. The rules are complex but the bottom line is if the amount transferred during the look-back combined with the amount of net worth at the time of application exceeds the maximum ($123,600 in 2018) the VA will impose a penalty period. It will be roughly measured by the amount of dollars over $123,600 the Vet would have divided by the maximum pension amount. The reason for the rule was to stop the practice of veterans purchasing annuities to reduce net worth.
Note that the look-back date runs from the date of application but the transfer penalty period runs from the date of transfer.
• A residence is still excluded but it is subject to a cap. The cap is not on the value of the property, which is what Medicaid does. The VA limit that the residence may not include more than two acres of property. This will work a hardship for vets who live in the exurban, semi-rural areas where parcels are larger.
• The VA has clarified an expanded list of what will be considered deductible medical expense. We can say that any “doctor ordered” product or service that will improve a the vet’s functioning; or that prevent, slow, or ease functional decline is covered.
Note that while we refer to vet the rules apply to any beneficiary/applicant.
The new rules add much needed clarity to the VA Pension program. Previously applications were decided by the judgment of the individual adjudicators processing the application. The process will be simpler for many applicants, but much more complicated for others because of the three year look-back. Allow me an example:
How can the following “transfers” be fixed? Suppose the applicant is a surviving spouse. After husband Vet dies surviving spouse adds daughter’s name to her accounts. Under current VA practice this has the effect of reducing net worth. Will the VA review every transaction from the bank account? Or suppose the applicant surviving spouse moves into daughter’s home and pays for necessary home modifications that takes her below the maximum net worth? How can this be fixed? Or, suppose in contemplation of getting benefits the family develops a care plan that includes the above and more?
As with many changes in government rules it takes a while for “the dust to settle” and some people may get chewed up in the process. The moral seems to be unless you have a very simple application with no history of “transfers” of net worth, it is best to check with an expert before you file.