Effective October 18, 2018, the Veteran Affairs (“VA”) Department implements its new regulations concerning Net Worth, Asset Transfers and Income Exclusions for Needs Based VA Benefits. The rules determine the eligibility of veterans, their surviving spouses, and their dependent children to receive pensions and other needs based VA Benefits. Let us discuss some highlights.
The VA Pension Regulations use a bright line eligibility test based on countable income and assets. To be eligible for needs based VA pension a claimant’s or a beneficiary’s net worth must not exceed the current “Net Worth Limit” of $123,600, effective October 18, 2018.
Net worth is computed based on adding the total value of a claimant’s countable assets, less any debt secured against real property, and the claimant’s annual income, less certain deductions. The VA expects more claimants will now be eligible.
Income still includes payments from annuities and Individual Retirement Accounts (“IRA’s”). Income counts both for purposes of pension eligibility and also for purposes pension rates, i.e., the pension amount.
The assets of a veteran claimant’s spouse are included as well as the veteran’s own assets. The assets of a child claimant’s custodian are included as a child claimant’s own assets.
Net worth is computed upon receiving an original pension claim, a new claim for reinstatement, a request to add a new dependent, or upon information that a veteran’s surviving spouse or child’s net worth has increased or decreased.
A residential exclusion from net worth is allowed for a residence, of any value, located on a lot up to 2 acres in size. If a lot exceeds 2 acres then the value of the excess acreage may be counted. Proceeds from the sale of an excluded residence are not countable if used to purchase a new residence within the same calendar year as the sale.
Certain Unreimbursed Medical Expenses — Activities of Daily Living (“ADL’s”) and custodial care expenses — may be deducted from a claimant’s or a beneficiary’s income for Net Worth and Pension Rate computations. The medical expense deduction, however, is first reduced by 5 percent of the applicable Maximum Annual Pension Rate (“MAPR”), which value changes each year. MAPR varies depending on other factors, including number of dependents. In 2018 the MAPR for a veteran with one dependent is $17,241.
Deductible Custodial Expenses goes beyond needing assistance with two (2) or more ADL’s to now also include, “… supervision because an individual with a physical, mental, developmental, or cognitive disorder required care or assistance on a regular basis to protect the individual … .” This includes dementia. Assistance from either an in-home care attendant or within a care facility is a potentially deductible medical expense.
A care facility is one, “other than a nursing home” in which, “a disabled individual receives health care or custodial care” and “must be licensed if required by State law”. The type of care and the individual’s need for such care rather than the name of the facility (e.g., Assisted Living Facility”) are now what determine whether the facility is a “care facility”.
While only around 1 percent of VA pension applicants engage in such asset transfers the VA expressed concern that veterans are often targeted for “self-impoverishment” schemes to qualify them for VA pensions. Asset Transfers within a 36 month look-back period prior to when the VA receives a pension claim can negatively impact eligibility. Asset transfers of a claimant’s net worth above the Net Worth Limit — the net worth exceeding $123,600 — create an ineligibility period. The ineligibility period will not exceed 5 years.
Anyone wanting guidance on how the new VA Regulations applies to them can consult a local Veteran service representative (e.g., a Veterans Service Office) or consult an accredited VA Benefits attorney.