By Swogger Bruce & Millar, Sep 19 2018 06:41PM
The reprieve is over. In 2015, the Department of Veterans Affairs proposed rules that would revamp its pension program which is commonly referred to as aid and attendance. The proposed rules would deny the pension benefits to veterans who transferred assets for less than fair market value like gifting, purchasing an annuity, or establishing an irrevocable trust. However, the proposed rules were never published in the Federal Register or implemented. Yesterday, September 18, 2018, the rules were published and will be applied starting October 18, 2018.
The new rules will impose a three-year look-back period that is similar to Medicaid’s five-year look-back period. Any transfer for less than fair market value made within the three-year period will penalize a veteran by preventing him from receiving pension benefits for up to ten years. The VA will take any assets transferred to meet pension eligibility requirements and divide that amount by the veteran’s maximum pension rate; the result will be the penalty period. While they share some similarities, the VA rules are significantly different than Medicaid’s penalty rules.
It does not appear that the changes are grandfathered, so, current applications that were submitted under the old rules could begin to be denied. You should also note that the ability to correct transfers for less than fair market value is much more limited than under the Medicaid rules. One of the changes that will affect my clients is that a veteran’s excluded homestead is only allowed two acres of land. Most of my clients, especially farmers, will have much more acerage than the limit. The excess land will cause planning complications.
It will take some time for the new rules to filter down to the VA manuals that determine application processing, but, there are a few things that are relatively clear: (1) annuities will no longer work for VA pension planning, and (2) gifting will not work for emergency planning, and (3) irrevocable trusts will not work for emergency planning. The VA rules provide incentive to plan as early as possible.
Please contact us if you are interested in a full discussion about the rule changes.