The Department of Veteran's Affairs (the "VA") has issued new regulations affecting eligibility for its Improved Pension benefit, better known as "Housebound" or "Aid and Attendance" benefits. The new regulations give bright lines to eligibility and impose new anti-gifting rules to tighten who can become eligible for benefits.
The improved pension benefit is a means-tested program to provide benefits to certain veterans or their surviving spouses. Generally, to be eligible, a veteran had to serve active duty in a period of war (as broadly defined by the VA) and have better than a dishonorable discharge. Under the old rules, the veteran or the surviving spouse needed to have income and assets (their net worth) below what was expected to be needed for the remainder of their life based on their age and medical expenses. The lack of a set limit caused considerable inconsistency in the awarding of benefits among claimants. Under the new rules, a claimant is only eligible if the claimant's net worth is less than $123,600 whether single or married. Net worth is the total of assets outside of the home (up to two acres) and any annual income in excess of unreimbursed medical expenses. If, for example, a claimant has assets (outside of the home) totaling $117,000, and the veteran's income, less medical expenses, is $9,000, the net worth is $126,000, and the veteran is ineligible for the benefit.
Additionally, the VA will now begin to look back at the finances of claimants to see if any gifts were made to accelerate the claimant's eligibility for benefits. Generally speaking, if a veteran or the veteran's spouse gifted assets within the past 36 months that helped bring the claimant's net worth below the limit, the application for benefits will be denied and the claimant will be penalized from reapplying for a number of months based on the size of those gifts. In addition, the VA considers the creation and funding of a trust or voluntary purchase of an irrevocable annuity a gift.
The new rules will take effect for applications and gifts made after Oct. 18, 2018. While this protects individuals who made gifts, set up trusts, or purchased annuities under the old rules from suffering a penalty period for those transactions, the VA can recalculate a claimant's benefits on discovering that the claimant's net worth has changed. For those claimants who have high income relative to their expenses and have assets near the limit, the new rules could result in a reduction or loss of benefits.
Family members interested in protecting their loved veterans and spouses should consult qualified legal counsel to see how the new rules will affect them.