Have you or a family member benefited from elder care reimbursed by an Aid & Attendance pension?
In 2017, an Aid & Attendance pension can provide a wartime veteran with up to $21,531 this year ($1,794 per month) to cover care at home or in assisted living. The surviving spouse of a wartime veteran can get Aid & Attendance pension reimbursement for up to $13,836 per year or $1,153 per month.
The Department of Veterans Affairs gave notice on January 23, 2015 that it will be changing the rules for pension eligibility.
New Aid & Attendance Eligibility Rules
Net worth will track Medicaid asset amounts; assets will include your annual income
Across the country, VA claims processors have been inconsistent about the amount of assets that veterans and their spouses who've applied for Aid & Attendance are allowed to have.
$80,000 has been the most commonly mentioned asset amount, but there has never been a written rule. The new "proposed net worth limit" will be a nationwide number that tracks Medicaid's maximum community spouse resource allowance. As of 2016, this amount is currently $119,220.
But unlike Medicaid, the VA's calculations would add an applicant's annual income and assets to see if a veteran or spouse is over the $119,220 limit. "The amount of a claimant's net worth would be determined by adding the claimant's annual income to his or her assets," according to the new rules.
There will be no hardship exceptions. The VA has concluded: "we do not believe that a hardship provision is warranted" because the proposed income and asset limit is greater than the $2,000 SSI asset limit that Social Security allows for people who've been impoverished by disability.
The VA would calculate (or recalculate) a claimant's net worth when it receives a new pension claim after a period of non-entitlement, gets a request to establish a new dependent, or finds information that net worth has increased or decreased. An example of a change in information would be the income tax reporting that is required whenever anyone sells real estate, such as a house.
Your home doesn't count as an asset, but there is a two acre lot limit
The VA net worth limit "would not consider a claimant's primary residence, including a residential lot area not to exceed 2 acres, as an asset."
So, if your home sits on a farm or a plot of land greater than two acres (87,120 square feet), the extra land would disqualify you, "unless the additional acreage is not marketable. The additional property might not be marketable if, for example, the property is only slightly more than two acres, the additional property is not accessible, or there are zoning limitations that prevent selling the additional property."
It doesn't matter that you are not living in the home, even if you are being cared for in another state. The VA "would exclude a claimant's primary residence as an asset regardless of whether the claimant is residing in a nursing home, medical foster home, or an assisted living or similar residential facility that provides custodial care, or resides with a family member for custodial care," according to the new rules.
But soon after you sell the home, the sale proceeds count as assets. "Proposed § 3.275 would also provide that if the residence is sold, proceeds from the sale are assets unless the proceeds are used to purchase another residence within the calendar year of the sale," the VA says. For instance, if you sold your house in December, you would have only a few days to decide what to do with the sale proceeds.
If you rent the home, the rent counts as income. "Any rental income from the primary residence would be countable annual income under § 3.271(d) for pension entitlement purposes (and thus would be part of net worth under proposed § 3.274)."
Additionally, the VA "will not subtract from a claimant's assets the amount of any mortgages or encumbrances on a claimant's primary residence." Conversely, you could take excess assets and pay down a primary residence mortgage without causing a transfer penalty.
A 3-year look-back on asset transfers can cause a 10-year penalty period
Unlike Medicaid, which has a five-year look-back to catch any disqualifying asset transfers, the VA has never in the past imposed a transfer penalty on veterans who gave away money to qualify for the Aid & Attendance pension.
But now, the "new requirements pertaining to pre-application asset transfers and net worth evaluations" will "establish a 36-month look-back period and establish a penalty period not to exceed 10 years for those who dispose of assets to qualify for pension. The penalty period would be calculated based on the total assets transferred during the look-back period to the extent they would have made net worth excessive."
The transfer of a ‘‘covered asset'' would "mean an asset that was part of net worth, and was transferred for less than fair market value. Transfer of "a smaller covered asset amount" would incur a shorter penalty period.
If you make a transfer during the three-year look-back period, then you must have clear and convincing evidence that transferring the asset was not "for the purpose of reducing net worth to establish entitlement to pension."
Otherwise, the VA will deny your Aid & Attendance benefits for months or years, based on how much you transferred. The amount you transferred will be divided by "the maximum annual pension rate at the aid and attendance level" and the result (quotient) is the number of months you will be disqualified.
In the example of "a surviving spouse with no dependents and A&A," the applicable MAPR (Maximum Annual Pension Rate) is $13,836, and the monthly penalty rate is $1,153. So, the formula for the penalty period is $10,000 ÷ $1,153 per month = 8.67 months.
After the penalty period is imposed, there will be a very tight time frame to solve the problem.The VA will only recalculate the penalty if (a) they made a mistake or (b) "if all of the covered assets were returned to the claimant before the date of claim or within 30 days after the date of claim."
The regulations don't explain how a veteran would know they needed to get assets back if the VA doesn't give notice of the penalty during the month after the claim is filed."Return of covered assets after the 30-day period provided would not shorten the penalty period," according to the new regulations.
The VA justifies their strict time frame by saying the "[n]umerous penalty period recalculations would detract from the primary mission of paying pension benefits to those in need."
Also be aware that, "[e]vidence showing that all covered assets have been returned to the claimant" must be provided to the VA within 3 months of the penalty notice."
The public comment period has now passed, but it's not too late to contact your member of Congress. It's important to get Congress to inquire about these changes. Call you representative in the U.S. Congress to alert them to problems with the proposed regulations. They do respond to knowledgeable constituents.
Read part two next: Proposed Changes to Aid & Attendance Affect Caregiver Wages. I provide more in-depth information on how the proposed changes will impact the cost of caring for a loved one and the restrictions the VA plans to place on Annuities and Trusts.