In last week’s post, I reviewed some major changes to the VA Aid and Attendance program. The one that gets the most attention for obvious reasons is the imposition of a 3 year look back and penalty period. This will restrict immediate access to the benefit for many veterans, at least those that don’t plan ahead. There are, however, other changes that I believe will potentially make it easier to qualify for this tax free pension.
Unreimbursed medical expenses remain important in both qualifying for the VA benefit as well as in the determination of how much of a pension the applicant can secure. These expenses are still subtracted from gross income in order to determine income for VA purposes (IVAP), which then determines the amount of a pension the applicant can receive. Medical expenses are also now relevant to the net worth calculation.
As I explained last week assets are added to annual income to calculate net worth, which must total no more than $123,600 (in 2018) to be eligible for the VA pension. Unreimbursed medical expenses, however, can also be used to reduce the income when calculating net worth, although if expenses exceed income the excess expenses can’t be used to further reduce assets. This means that we can reduce the income to zero. In that case net worth would consist solely of assets, as it did under the old rules, except now we have a higher asset limit than the old number of approximately $80,000.
What qualifies as a medical expense has also changed and overall has been expanded. Deductible medical expenses include care, medications, supplements, adaptive equipment, transportation expenses and insurance premiums. Administration of medications must be provided by a licensed caregiver in order to count as a deductible expense unless the applicant is housebound or needs aid and attendance.
The cost of assisting with IADLs such as shopping, meal preparation, laundry, housekeeping, handling finances and medication assistance can be deducted from income under the new rules provided the applicant is receiving health care or custodial care from an appropriate provider under VA rules. Care provider has also been expanded to care facilities other than a nursing home or assisted living facility. This potentially opens up the opportunity to use rent in an independent facility as a medical expense offset to income, if care is provided there by a family member. A qualified medical professional must state in writing that the applicant needs to be in a protected environment due to a mental, cognitive or physical disorder.
So far, from my study of these changes it is becoming clear that there are some real positives that maybe will be overlooked because of the big negative of a 3 year look back. In my final post next week I’ll try to put it all together and talk about the opportunities that these changes present.