VA Proposes New Rules Including Asset Transfer Penalties

Hands holding an American flag

On January 23, 2015, the Department of Veterans Affairs (the “VA”) proposed new rules for its pension program (including the Aid & Attendance program) that include:

– Penalties on asset transfers within three years of an application for benefits

– Adjustment of the net worth limit to $117,240 (specifically, to match the Medicaid community spouse resource allowance, adjusted annually for cost of living)

– Inclusion of an applicant’s income as part of the net worth analysis

…and a number of other changes.

Under one of the most significant proposals, Veterans (and surviving spouses of Veterans) would no longer be able to transfer assets (outright or in trust) in order to be eligible for the VA Pension, at least not in the three years before application.

The rules are unclear on whether they would apply to prior transfers, that is, those made before the implementation of the rules in final form. Further, as drafted, the transfer rules would penalize the surviving spouse of the Veteran more than the Veteran.  Many practitioners are up in arms about these and other problems with the proposed rules.

Needless to say, it will be interesting to see how this all plays out.

Image © maticsandra

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About Sarah R. Watchko, Esq.

Sarah R. Watchko is an attorney practicing estate planning and elder law in Atlanta, Georgia

2 responses »

  1. Michael Shulman

    How do these new VA rules affect the transfer of VA Aid & Attendance benefits to a Qualified Income Trust account for Medicaid applicants in a nursing home?

    Reply
    • That is a great question. I have not seen an exception to transfers made to a Qualified Income Trust in the proposed rules. In Georgia, VA Aid & Attendance benefits are not counted as income for Medicaid eligibility purposes. Further, once an individual is on Medicaid for nursing home benefits, the Aid & Attendance benefit is reduced to $90 per month. So, it is not necessary to transfer the Aid & Attendance benefit to a QIT (although dealing with the excess funds while waiting for the VA to catch on and reduce the benefit to $90 is a tricky endeavor…)

      All that being said, one of the many shortcomings in the proposed rules is that certain trusts are not excepted from the transfer rules, also including revocable living trusts that may be beneficial for estate planning purposes. Hopefully the comments and recommendations made during the comment period will cause the VA to address these issues!

      Reply

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