The VA Pension Benefit
Presented By: Krause Financial Services
Hi, I’m Amy Beacham, Communications Director for Krause Financial Services. Today, we’re going to talk about the VA’s non-service-connected pension benefit.
In October of 2018, the VA adopted rule changes that greatly affect the way elder law attorneys plan for this benefit. This video will provide an overview of the program’s general requirements, some of these rule changes, and how attorneys can help their veteran clients qualify for VA benefits.
The VA pension benefit is a monthly, tax-free stream of income meant to help veterans and their loved ones with their monthly medical expenses. It’s a non-service-connected benefit, meaning the veteran did not incur a disability in the line of duty. There are three types: the base pension, housebound pension, and Aid & Attendance pension, which provides the most financial assistance.
To apply, the applicant must be a qualified veteran, either single or married, or the surviving spouse of a qualified veteran. A qualified veteran is someone who served 90 days of active duty with at least one day during an official period of war. They must have also received a military discharge other than dishonorable. In cases involving a married couple, the veteran must always be the claimant or the applicant in need of care. The claimant must also be 65 or older or permanently and totally disabled.
Financial requirements also apply. The claimant, whether single or married, must have a net worth below the maximum Community Spouse Resource Allowance for Medicaid. Assets that count toward a claimant’s net worth include items such as checking accounts, life insurance policies, and IRAs. Assets that are exempt include the primary residence, one vehicle, and an Irrevocable Funeral Expense Trust. Net worth is determined by calculating the claimant’s total countable assets and their annual IVAP, or Income for VA Purposes.
The IVAP is determined by deducting the claimant’s household recurring unreimbursed medical expenses, or UMES, from their household monthly income. The resulting figure should be negative. If the claimant has a positive IVAP, their benefit will be reduced dollar for dollar until they are no longer eligible. Note that a negative IVAP does not increase the number of assets a claimant can keep.
If the claimant has an excessive net worth, they are limited in the ways they can spend down. The VA has a three-year lookback period in which they will review transactions made by the claimant for which they did not receive fair market value. They will also review transactions made for the purpose of eliminating net worth, such as those to an irrevocable trust or an immediate annuity. If the claimant did make an asset transfer, they would be subject to a penalty period of ineligibility. The penalty period is determined by dividing the amount transferred in excess of the net worth limit by the current Aid & Attendance pension rate for a married veteran. A penalty does not apply to transactions that occurred before October 18, 2018.
The implementation of the lookback period and the treatment of trusts and annuities as penalized transfers changed the way elder law attorneys can help their clients qualify for benefits. The best way to help your client gain this benefit is through pre-planning. Talk to your veteran clients now about the possibility of needing this financial assistance in the future. If they have assets above the net worth limit, they can transfer those assets to an irrevocable trust, so long as it is done at least three years in advance of applying for benefits. If your client needs this benefit right away, consider purchasing or improving exempt assets, such as the primary residence or vehicle.
For more information on the VA pension program, contact our office at 855-552-5893.
I’m Amy Beacham, and thanks for watching.
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