New VA Pension Rules Will Bring Changes in Planning for Veterans Needing Income for Care
A new rule has been published by the Veterans’ Administration that relates to veterans “pension” benefits. This rule makes sweeping changes to the eligibility rules for pension. It takes effect on October 18, 2018. A copy of the rule can be found here.
This article highlights a few of the changes.
First, an explanation of VA Pension. Its a bit misleading. “Pension” is not military retirement pay. It is an income benefit for veterans who meet certain criteria related to their net worth, and have served in a war-time period. “Pension” is often called “aid and attendance” but that is a bit misleading also, because “aid and attendance” is just one of the criteria that affects the amount of the pension.
“Pension” is also NOT health insurance. The way I explain it, VA Pension is sort of like Social Security. It is a fixed amount of money you get every month, to use the way you feel best. It is not enough to cover the cost of nursing home care, although it could provide income that, when added to your other income, might make assisted living more affordable.
On the other hand, when it comes to people who need long term care, Medicaid is health insurance that will cover those costs if you qualify. This is why, when it comes to planning, I encourage my clients to choose strategies that will allow them to qualify for Medicaid over VA Pension, in those cases where we need to make a choice.
In the past, planning strategies for the two programs were very different. With these new changes, the programs are more aligned. But still, there are differences. Mastering the maze of this set of choices is best done with the help of an elder law attorney.
SOME OF THE CHANGES:
36-month transfer penalty: The new VA rule imposes a 36-month penalty for transferring assets without receiving fair market value. This is similar to the Medicaid “divestment” laws that I have explained several times on this blog.
Fixed “net worth” eligibility rules: one of the mysteries of VA pension planning in the past was the fact that the rules to qualify did not have fixed numbers attached, but rather were based on “need.” Now, there are some numbers that will make our planning clearer. The net worth test is $123,600 for 2018 and is set to be adjusted on a regular basis. There are some assets that are not counted, such as a home and a car. The test is a little different than Medicaid rules in that it takes into account income as well, and subtracts medical expenses.
Homestead exclusion: The homestead exclusion is limited to the home and a 2 acre area surrounding the home. This could pose a problem for some people in rural Wisconsin where the lot is much larger.
I am just starting to study the new rule, so I will leave the analysis here for the time being. There have also been concerns raised about whether or not the VA had authority to create this rule. Stay tuned.
