Blog Author: Stephen C. Hartnett, J.D., LL.M. (Tax), Director of Education,
American Academy of Estate Planning Attorneys, Inc.
The Veteran’s Administration is beginning asset limits for qualification for the Aid & Attendance benefit. The limit goes into effect on October 18, 2018. If transfers are made prior to October 18, 2018, they will escape penalties on the transfer and the applicant would qualify. Read on for more information on this unique opportunity.
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 Medi-Cal/Medi-Cal, the applicants must meet certain financial tests. With Medi-Cal, under the Deficit Reduction Act (DRA), there’s a penalty if the client gives away assets to get below that asset limit. For Medi-Cal purposes, there’s a 60-month look-back from the date of the Medi-Cal application (Medi-Cal currently has a 30-month look-back period), 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 applicant 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 Medi-Cal 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 applicant 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. Time is of the essence.
The Litherland Law Firm is a member of the American Academy of Estate Planning Attorneys and Roy W. Litherland is VA-Accredited. Contact us by calling (408) 356-9200 or (831) 476-2400 or visit our web site contact us page.
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