I have written many times in the past several years about possible rules changes to the VA Aid and Attendance pension program, which provides additional income to aging veterans and their spouses who need long term care. Well, those changes are finally here and with almost no warning. The new rules only announced late last month become effective October 18, 2018 so for some there may be an opportunity to act quickly in the next 10 days to preserve eligibility under the old rules. Let’s go over the highlights.
The change that will have the biggest impact is the imposition of a 3 year look back period. Similar to Medicaid (which has a 5 year look back) the VA will now look back 3 years from the date of the application for benefits. Any transfers for less than fair value will be subject to a penalty or period of ineligibility for benefits, again, similar to Medicaid. The penalty will be calculated by taking the amount transferred and divide by the maximum pension for Aid and Attendance, currently $2169. This divisor is much lower than Medicaid’s number which will result in a greater penalty for the same amount transferred, however, the penalty caps at 5 years.
The second significant change is that the net worth limit is now tied to Medicaid’s Community Spouse Resource Allowance of $123,600. This means to achieve eligibility one must have no more than $123,600 in net worth, however, the VA counts income as part of net worth. Monthly income is multiplied by 12 and then added to the assets to determine net worth.
Just like Medicaid, a primary residence is excluded from net worth, however, with important differences. Only the primary residence and 2 acres is excluded from net worth. Although this will not impact most New Jersey residents, if you have a home on more than 2 acres the additional acreage will be counted towards net worth unless it can be shown to be unmarketable.
There are other rules changes relating to what counts as a deductible medical expense but the important immediate take away is that any wartime veteran or spouse of a wartime veteran with a net worth in excess of $123,600 who needs long term care must act now to be able to immediately qualify for a VA pension and avoid the look back and penalty.
Next week I’ll discuss what the long term impact of these changes is expected to be and what planning for long term care will look like on 10/18/18 and beyond.