On October 18, 2018, the rules for the VA benefit often called “Aid and Attendance” will be dramatically different.
The Aid and Attendance benefit provides a monthly, tax-free income to veterans and their surviving spouses when they meet certain requirements. Those requirements fall into three categories.
First, claimants for this benefit must prove that they have the right veteran status. That means that they or their deceased spouse must have at least 90 days of active duty service with at least one day falling during a wartime period. The new rules did not modify this requirement.
Second, claimants for this benefit must prove that they have health needs requiring assistance with activities of daily living. When a claimant’s doctor certifies the need for long-term care—whether it is provided in the home, through an assisted living facility, or at a nursing home—this requirement is almost always met. The new rules only slightly modify this requirement, mostly by defining some previously undefined terms.
Third, claimants must meet strict financial tests. This is the area most impacted by the new rules.
Under VA rules old and new, to receive the maximum benefit claimants must have monthly recurring medical expenses equal to or greater than their monthly income. But under the old rules, it was unclear what the VA considered a qualifying medical expense. The new rules provide additional clarity, but at the top of the list remain home caregiver expenses, assisted living fees, and nursing home costs.
Also under the old and new VA rules, to receive any benefits, claimants must have limited net worth. But the limit was previously unclear. It varied depending on whether the claimant was married or single. It also seemed to change based on age. As a loose rule of thumb, an $80,000 limit applied to married couples and a $40,000 limit applied to single claimants. That is no longer the case.
Under the new rules, the initial net worth limit is $123,600 for all claimants regardless of marital status or age. This is a welcome change.
More important to many claimants, though, is the new look back period and transfer penalty. Under the old rules, a claimant whose net worth exceeded the VA limit could transfer assets to family members or to a particular type of trust. They could use assets to purchase annuities designed to increase their monthly income while reducing their net worth. Those options no longer exist.
Claimants must now report all asset transfers occurring within the three years immediately leading up to the submission of an application. This includes any transfers to trust and the purchase of annuities. When those transfers help a claimant meet the new VA asset test, the VA will impose a transfer penalty during which benefits will not be paid. The VA will use a formula to determine the length of the penalty—the more assets transferred, the longer the penalty, up to a five year limit.
What does this mean to you? If you are currently in the process filing for benefits, you must hurry and you should be very careful. The new rules do not apply to transfers completed before October 18, 2018. This means the look back period and the transfer penalty do not yet apply, but it also means the VA will be taking a hard look at applications submitted around this deadline.
If you’re not ready to file now but can see the need for VA benefits in your future, these new rules make it essential that you plan ahead! In the past, it was common to wait until long-term care needs hit to plan for VA benefits. That is no longer an option. Call today to start planning so that when the need arrives, you will be ready.