The Veterans Administration has announced new rules for evaluating net worth, asset transfers and income exclusions under the Aid and Attendance program for wartime veterans and their surviving spouses. These changes go into effect on October 18, 2018 so it may be your last chance to plan before that date.
Aid and Attendance Benefits: The Aid and Attendance program provides tax-free income benefits to qualified veterans and widows of veterans over the age of 65 to offset the cost of care at home, in an assisted living facility or a nursing home. Unlike many VA programs, Aid and Attendance benefits are not tied to service-connected disability determinations. In order to qualify for these benefits the following requirements must be met:
(1) The Veteran cannot have been dishonorably discharged
(2) The Veteran must have served at least 90 days, 1 day of which was during a period of armed conflict (WWII, Korea, Vietnam, Gulf War). Service does not have to be in the theatre of war.
(3) The Veteran's net worth cannot exceed a specified maximum ($123,600 in 2018).
(4) The Veteran's household gross income (including the spouse's income), after applicable deductions, cannot exceed specified thresholds based on marital status and number of dependents.
(5) The Veteran must require help with activities of daily living.
Net Worth: Prior to the rule change, there was no hard and fast net worth cap. Depending on the Veteran's age, maximum net worth varied between $40,000 and $80,000. The new rules provide a set maximum of $123,600 regardless of age, and specify what counts in determining net worth. Under the new rules, net worth is determined by adding the fair market value of "countable assets" (almost everything owned by the Veteran and spouse, other than a principal residence, a car and personal property) to the applicant's total household annual gross income, and deducting certain unreimbursed medical expenses. Unreimbursed medical expenses include any medical expenses the Veteran will not be reimbursed for from any source and include: health insurance premiums and deductibles, co-pays, Medicare premiums, and the entire cost associated with home-health care, assisted living care and nursing home care.
Income: The amount of the monthly benefit that may be paid to the Veteran is determined by comparing the household's gross monthly income against the following thresholds. When that income is lower than the applicable threshold, the VA will bring their income up to the specified amount; in other words, will make-up the shortfall. As described above, income is gross annual income less qualified unreimbursed medical expenses
Threshold Max Monthly Benefit
Single Veteran with no dependents $21,962 $1,830
Veteran with spouse or one dependent $26,036 $2,169
Surviving Spouse of Veteran $14,112 $1,176
For example if a single Veteran's gross annual income totals $40,000 and he/she resides in an assisted living facility costing $4,000/month ($48,000/year), the Veteran would be entitled to the maximum monthly benefit of $1,830 per month to apply against the cost of his or her care (annual income of $40,000 - $48,000 unreimbursed medical expenses = negative $8,000) which offsets all countable income. If, however, gross annual income was $60,000, after subtracting the unreimbursed medical expenses, countable income would total $12,000. The monthly benefit in that case would be approximately $813 ($21,962 minus countable income of $12,000 = $9,962 divided by 12 months = $830 per month).
Asset Transfers: This is a very significant change. Prior to the rule change, there were no penalties associated with giving away assets in order to qualify. Under the new rules, the VA will look-back 36 months before the date of filing to see if any of the applicant's assets were given away, and if so, will calculate a period of ineligibility for benefits, with the penalty determined by dividing the value of the gifted assets by the monthly maximum Aid and Attendance benefit, which in most cases for married Veterans is $2,169. The penalty period begins on the first day of the month after the month of transfer and cannot exceed five years. Further, only transfers of non-exempt assets are subject to the penalty, so if an applicant's net worth is already below $123,600, transfers of those assets should not result in a penalty. If assets are placed in an irrevocable/non-cancelable annuity or trust (a common planning technique prior to the rule change), it will now be treated as a gift resulting in imposition of a penalty period. The penalty can be cured by undoing all or a portion of the gift, but must be done within 60 days of the VA Notice of penalty and the VA must be notified of the cure within 90 days.
Assistance with ADLs: To qualify for Aid and Attendance benefits, the Veteran (or widow) must either be blind, live in a nursing home, or, if living at home or in an assisted living facility, require assistance with at least two "activities of dialing living" (ADLs), which typically consist of: dressing; bathing, feeding, toileting, transferring. The new rules now include personal assistance with ambulation at home. This does not include use of a walker or cane, but requires assistance by a person.
One other significant change applicable to assisted living facilities is that the full cost of care will be covered not only when the applicant requires assistance with at least two ADLs, but also if the applicant's doctor affirms in writing that the person must live in such a facility due to the need for "supervision because an individual with a physical, mental, developmental, or cognitive disorder requires care or assistance on a regular basis to protect the individual from hazards or dangers incident to his or her daily environment." This expansion is significant in that many individuals with cognitive deficits may not require assistance with at least two ADLs and before now would not qualify.