If you are accredited with the Veteran’s Administration, there’s an opportunity to act quickly to help some of your clients.
Background: The VA offers a valuable benefit to wartime veterans, i.e., those who served even 1 day in a time of war (which is much of the last century), served at least 90 days in one of the branches of the service, and did not receive a dishonorable discharge. If the veteran is age 65, and the veteran or their spouse needs assistance in daily living (such as bathing, dressing, feeding, or toileting) or is blind, in a nursing home, etc., they may qualify for a benefit that could exceed $26,000 per year, tax-free.
Like qualifying for Medicaid, the applicants must meet certain financial tests. With Medicaid, under the Deficit Reduction Act (DRA), there’s a penalty if the client gives away assets to get below that asset limit. For Medicaid purposes, there’s a 60-month look-back from the date of the Medicaid application, during which any uncompensated transfers are penalized. Up until now, there has been no look-back or transfer penalty for VA Aid & Attendance benefits purposes. In other words, until now, the client could give all their assets away today and be ready to qualify for Aid & Attendance tomorrow.
Under the regulations, set to go into effect on October 18th, this changes. Here’s a link to the Proposed Regulations. Here’s a link to how they are modified after the comment period. Beginning October 18, there’s a new limit which is equal to the maximum Medicaid Community Spousal Resource Allowance (CSRA) of $119,220, as adjusted for inflation. The applicant’s total assets and income are combined and the applicant doesn’t qualify if their combined assets and income are above the maximum CSRA figure. At least the applicant’s residence does not count in this calculation.
If the client divests themselves of assets in an uncompensated transfer, there’s a penalty. There’s a look-back period of 36-months from the date of the application to determine if uncompensated transfers were made during that period. If there are uncompensated transfers during the look-back period, there would be a penalty period of up to 5 years.
However, these divestment rules don’t apply to transfers made prior to October 18, 2018. So, if you are VA-accredited and you reach out to your client and your client acts prior to that date, they can qualify without a penalty period. For example, the client could give all of their assets in excess of the CSRA limit to their children or others and qualify the next day. As long as the transfers are complete prior to October 18, there would be no penalty period for the transfers.
In order to assist clients in planning for VA Aid & Attendance benefits, the attorney must be VA-Accredited. Here’s a link to the VA Office of General Counsel for more information about becoming accredited with the VA.
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
Steve Hartnett
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