The U.S. Department of Veterans Affairs (VA) provides several types of services to our nation’s veterans, including, but not limited to, healthcare services, home loans, assistance with education and vocational rehab, pensions, life insurance, and burial/memorial benefits. Although the government has provided benefits to our veterans since the Revolutionary War, the VA did not come into formal existence until 1930.
One of the most important services the VA offers is pensions to veterans over the age of 65 who saw active duty during a wartime period. These pensions are also available to a veteran’s surviving spouse and certain children. They cover long term care costs, whether they are costs for care at home, in an assisted living facility, or at a nursing home. Veterans have always needed to meet certain eligibility requirements to qualify for these pensions, but in 2015, the VA proposed new rules altering the process for qualifying for pension benefits. They proposed these changes to try to ensure that only those applicants who were truly needy would receive benefits. They were hoping to get Congress to act on the new rules, but when Congress failed to do so, the VA unilaterally implemented the new rules in late 2018.
One of the most significant changes is found in the way the VA will examine the assets of a veteran to determine his or her eligibility for benefits. Under the former system, the VA reviewed each case on an individual basis, looking at an applicant’s unique circumstances, and used a household income cap to determine eligibility; now, the VA determines eligibility based on an applicant’s net worth. Applicants are only eligible if the value of their assets—including their income—falls below a specific amount. For 2019, this amount is $123,600.
A related change to the rules involves the value of an applicant’s home. In the past, the VA excluded the value of an applicant’s home and land from consideration for eligibility, but under the new rules, the VA will exclude only the value of an applicant’s home and a two-acre parcel of land on which the home sits. For veterans who own less than two acres, this rule will have no impact on their eligibility, but for those veterans who own farms or other large parcels of land, it may automatically disqualify them from receiving benefits, as the value of their excess land is counted toward the asset limit amount. In addition, if an applicant sells their residence with the intent of downsizing in order to qualify for benefits, they will need to purchase their new home in the same calendar year. If they do not, the VA will count the proceeds from the sale of their home toward the asset limit amount. This means that if an applicant sells their home in December, they will have less than a month to purchase a new one.
The VA will now also impose a three-year look-back period when determining eligibility, similar to the way Medicaid looks back. Under the former rules, applicants could plan and structure their assets in favorable ways prior to applying for benefits, but under the new rules, certain transfers of assets within the three-year period, including the use of certain trusts or annuities and transfers for less than fair market value, could result in a penalty period of up to five years.
Finally, the VA has updated its definition of a deductible medical expense. In the area of custodial care, it has expanded its scope regarding assistance with the activities of daily living (ADL), as well as allowing those who receive custodial care to include the instrumental activities of daily living (IADL) as deductible expenses. In addition, it also considers room and board costs at care facilities to be deducted as medical expenses. This can make it easier for some applicants to meet the eligibility requirements.
The VA will not permit hardship exceptions to the asset limit amount, but it does allow for a 90 day cure period after a penalty has been imposed in which applicants can try to correct their financial ineligibility, though this can be challenging to do. The intricacies and complexity of these new rules make it more important than ever that applicants consult experienced professionals who can help guide them through this process. At Phelan Webber Pettis PS, we are here to help you with your estate planning needs.