VA Changes Loom: Eligibility Requirements Expected to Tighten
If you are hoping to get reimbursement for care-related expenses from the VA’s Aid & Attendance program, you may want to complete your application as soon as possible. Upcoming changes to VA eligibility requirements will create new hurdles that veterans and their families must clear in order to qualify for benefits.
On January 23, 2015, the Department of Veterans Affairs gave official notice that it would be changing the rules for pension eligibility. The proposed changes, published in the Federal Register, generated more public comment than any VA has ever proposed. Though none of these changes are official yet, the VA is expected to issue the Final Rule on the matter sometime after April 2017.
The proposed rules will change several things, but three are particularly drastic.
A 3-year look-back on asset transfers can cause a 10-year penalty period
This proposed change is perhaps the most controversial. Unlike Medicaid, which has a five-year look-back for any disqualifying asset transfers, the VA has not previously imposed a penalty on veterans for “less than fair market value” transfers made prior to applying for the Aid & Attendance pension.
The proposed rules change that. The new requirements pertaining to pre-application asset transfers and net worth evaluations will establish a 3-year look-back period and impose a penalty period not to exceed 10 years upon those who dispose of assets for less than their fair market value. VA will operate under the “presumption, absent clear and convincing evidence showing otherwise, that asset transfers made during the look-back period were made to establish pension entitlement.”
The transfer penalties imposed will be far more severe than Medicaid’s current penalties. VA will deny your Aid & Attendance benefits for months or even years, based on the amount you transferred. The amount you transferred will be divided by "the maximum annual pension rate at the aid and attendance level,” then divided by 12, and the result (quotient) is the number of months you will be disqualified. Medicaid, on the other hand, divides the amount transferred by the average cost of nursing home care in your particular state. In 2016, the monthly cost of a semi-private room in a Georgia nursing home was $5,779. In 2016, the highest monthly amount for VA’s maximum pension rate was $2,120. Obviously, the lower the divisor (the number divided into), the longer any imposed penalty will be.
For example, suppose that a married veteran gave his grandson $40,000 to help pay for college. If the veteran were to apply for Aid & Attendance any time within the next three years, VA would rule him ineligible for benefits for 18.87 months ($40,000 / $2,120 = 18.87-month penalty period). If he were to apply (and otherwise qualify) for Georgia Medicaid, he would be ineligible only for 6.92 months ($40,000 / $5,779 = 6.92-month penalty period).
Net worth limit will align with Medicaid asset amounts; assets will include annual income
The new "proposed net worth limit" will be a nationwide number that tracks Medicaid's maximum community spouse resource allowance. This amount was $119,220 in 2016. However, unlike Medicaid, the VA’s proposed net worth calculation would factor in more than just assets in the traditional sense. The calculation would further include an applicant's annual income to determine if the net worth of a veteran or spouse exceeds the $119,220 limit.
There will be no exceptions for financial hardship.
Your home doesn't count as an asset—as long as the lot is no more than two acres
The VA net worth limit "would not consider a claimant's primary residence, including a residential lot area not to exceed 2 acres, as an asset." However, a number of new restrictions apply.
For instance, if your home sits on a lot larger than two acres, the extra land will disqualify you unless the additional acreage is not marketable—meaning that the property’s acreage only slightly exceeds two acres, the property is not accessible, or zoning limitations exist that prevent selling the additional property.
The new rule also states that if the residence is sold, proceeds from the sale are countable as an asset unless the proceeds are used to purchase another residence within the calendar year of the sale. This will create challenges for families that sell a home late in a calendar year. For instance, if you’re selling your home and the deal closes on December 28, you would have only a few days to decide what to do with the proceeds.
If you opt to keep the home and lease it, the rent you collect will be countable as income. And if you have a mortgage on the property, the VA won’t subtract the amount you owe from the value of the property. However, you could take excess assets and pay down a primary residence mortgage without causing a transfer penalty.
Give us a call. The professionals at Kimbrough Law are well equipped to guide you through the complicated claims process.