Estate and Trust Dispute Center of Ohio

On September 18, 2018, the U.S. Department of Veterans Affairs (VA) issued Final Rule Number 8320-01, RIN 2900-AO73, which goes into effect on October 18, 2018.  This Rule establishes new requirements for evaluating net worth, medical expense deductions, and asset transfers,and drastically changes the planning opportunities available for veterans and their surviving spouses. 

Who is Eligible for a VA pension? 

The VA pension is available to veterans or surviving spouses of limited income and resources.  The pension begins with a base rate and then increases depending on the number of dependents and whether the veteran or surviving spouse is housebound or in need of “aid and attendance” (i.e. assistance with at least two activities of daily living).  A single veteran can receive between $13,166 and $21,962.00 depending on his/her rating and will increase based on the number of dependents.  A surviving spouse without a dependent can expect to receive between $8,830.00 and $14,113.00. 

In order to be eligible for the pension, the claimant’s income must be less than the maximum annual pension rate.  However, the VA will allow deductions for the claimant’s unreimbursed medical expenses. Under the new Rule, the definition of unreimbursed medical expenses has been expanded to include the cost of care, medications, adaptive equipment, insurance premiums, etc.  Further, the new rule has expanded the traditional definition of activities of daily living (ADLs) to include assisting with ambulation within the home, to the traditional eating, bathing, dressing, toileting, and transferring.  The monthly fee paid to a care facility may also be a deductible medical expense if the individual receives health care or custodial care and is receiving assistance with at least 2 ADLs or a physician certifies the need for a protective environment. The facility must be staffed 24 hours per day with care providers. 

As of October 18, 2018, the net worth limit is $123,600.00 and is subject to an annual adjustment.  Net worth does not include the residence and up to 2 acres, family transportation vehicles, personal effects used on a regular basis, and prepaid funeral and burial lots.  Any trust, annuity, or other asset where the claimant retains the ability to liquidate, will be considered in calculating net worth. 

The new Rule also includes annual gross household income in calculating net worth; however, net unreimbursed medical expenses can be applied to reduce gross income. Therefore net worth is calculated by adding countable resources to the difference between annual gross household income and allowable net unreimbursed medical expenses. 

In addition to establishing a net worth limit, the new Rule also establishes a penalty period for asset transfers made within 36 months preceding the application for the pension.  Prior to October 18, 2018, there was no penalty period for assets transferred from a claimant prior to the application.  Pursuant to 38 CFR § 3.276, there will be a penalty period for transferring a covered asset.   The penalty period is based on the maximum annual pension for a married veteran who needs aid and attendance (currently $2,169.00 per month) rounded down to a whole number.  Therefore, the amount of the transfer is divided by $2,169.00. The resulting figure is the number of months the claimant will not be eligible for the pension. The restricted coverage period begins on the date of the transfer.    

There are some exceptions to the transfer rules, including those made as a result of fraud or unfair business practices.  There is also an exemption for transfers to a trust established for a child incapable of self-support prior to age 18.  Further, claimants can consider a partial or complete return of a gift in order to gain eligibility. 

As a result of the rule changes related to the VA pension, it is imperative that you seek assistance from (or if you are a professional, refer your clients to) an attorney accredited with the Veterans Administration for further assistance.