On January 23, 2015, drastic changes were proposed to VA Aid and Attendance benefits for veterans and his or her spouse. The proposed 2015 changes were as follows:
- A three-year look back period would have been implemented, in which all gifts made by the veteran or spouse during that period had to be disclosed.
- Any gifts made during this lookback period would have imposed a penalty period for up to ten years, during which time the veteran or spouse would not receive any benefits.
- The principal residence exclusion was limited to two acres.
- Certain expenses such as payments to independent living facilities would not have counted as “unreimbursed medical expenses” to reduce the veteran’s income for purposes of calculating his or her eligibility. Additionally, payments to home caregivers would have been capped at $21 per hour, which was well below the average rate in many parts of the country.
The proposed 2015 changes were widely decried by veterans’ rights advocates and elder law attorneys as being overly harsh and arbitrary. While the proposed 2015 changes were never implemented, lawmakers made it clear that changes in the law would be made at some point in the future.
After much anticipation, those changes were finally announced on September 18, 2018 and went into effect on October 18, 2018. The new rules are as follows:
- The net worth cap for both married and single veterans is $123,600, which increases at the Social Security benefit increase percentage each year. However, the homestead (up to two acres), personal effects, and family transportation vehicle(s) are not counted towards the net worth limit.
- There is now a three-year lookback period for gifts or transfers of “covered assets”, i.e. assets in excess of the net worth cap. This period will not apply to transfers made prior to October 18, 2018. If the transfer or gift was made from non-covered assets, then no penalty will be imposed.
Example 1: John has a net worth of $130,000 and he gifts $10,000 to his son immediately prior to his VA Aid and Attendance application. $6,400 will be counted as the penalty amount.
Example 2: John has a net worth of $110,000 and he gifts $10,000 to his son immediately prior to his VA Aid and Attendance application. Because he has no covered assets that exceed the asset cap, there will be no penalty.
- The penalty period for gifts or transfers made during the lookback period are calculated based on the maximum amount a married veteran with one dependent could receive in the current year. In 2018, that number is $2,169.
In Example 1 above, the penalty period would be three months ($6,400 / $2,169).
- The penalty period is capped at a maximum of five years.
- Penalties for gifts or transfers may be partially or fully “cured” by returning the asset prior to the application for benefits or within sixty days of the notice of penalty.
In Example 1 above, if John’s son returns the entire $10,000 before the VA Aid and Attendance application or after John applies and receives notice of the penalty, the penalty will be reversed.
- Transfers to an irrevocable trust, with the exception of a valid special needs trust for a disabled child, can no longer be used to exclude countable assets.
- Medical expenses, including certain personal caregiver expenses, may be used to offset total income.
The 2018 changes bring VA Aid and Attendance eligibility requirements closer in line with Medicaid eligibility. The “moving target” of asset eligibility under the prior rules have been eliminated in favor of a brightline asset test but gifting, previously a popular and relatively easy strategy to achieve Aid and Attendance eligibility, is now treated similarly to Medicaid divestments.
