By Cyril Tuohy
Proposed changes to the way the Department of Veterans Affairs (VA) calculates pension entitlements could hit some military veterans and their spouses hard. The proposed changes also could affect the financial planning strategies some advisors employ with their clients who are military veterans.
At issue is the way the VA uses asset transfers and penalty periods to deny or discontinue VA benefits if a VA beneficiary’s net worth and annual income exceeds $119,220, according to the proposed rule changes affecting the Improved Pension with Aid and Attendance program.
Victoria Collier, a licensed insurance agent and an elder law expert with the National Academy of Elder Law Attorneys (NAELA), told InsuranceNewsNet that in the worst case scenario, a military veteran receiving the maximum of $25,440 a year in tax-free income from the VA could stand to lose it all.
“The worst case is that all of it could go away; they wouldn’t be eligible based on the new criteria,” she said. “It’s a big chunk.”
With elder care and nursing home costs running as high as $80,000 a year in some parts of the country, removing $25,440 a year in income — even if it’s a third of the cost of a nursing home — is a huge hole for veterans, she said.
Veterans who served during wartime and have either a nonservice-connected disability or are over age 65 are eligible for a “veterans pension” to help pay for long-term care. But, in order to qualify, they need to meet income and asset requirements.
Veterans most affected are World War II and Korean War veterans and their spouses and widows who have long-term care needs, who benefit from home health care and who live on “a farm,” or more than two acres of land.
Vietnam vets with early-onset Alzheimer’s disease also might also be affected, Collier added.
It’s not clear how many veterans might be affected by these changes.
Collier said 59 percent of war veterans living in the U.S. are over the age of 75. In addition, between 2015 and 2036, more than 9 million veterans will be 65 years old or older, a number which does not include spouses.
In publishing its proposed changes, the VA says it’s necessary to “promote consistency in benefit decisions, reduce opportunities for attorneys and financial advisors to take advantage of pension claimants, and preserve the integrity of the pension program.”
Over five years, the savings would amount to tens of millions of dollars as tighter eligibility requirements ensure that only veterans who need the benefits are actually awarded them, according to VA estimates.
VA officials seem to think the proposed changes align with the “intent of Congress,” and that they don’t need Congressional legislation to implement the changes.
But in a letter to Stuart Weiner in the VA’s Congressional Liaison Service, Sen. Patrick J. Toomey, R-Pa., is asking for the VA to reveal more information about how the proposed changes might affect veterans seeking care.
Toomey specifically cites the proposed implementation of a 36-month “look-back” period, and even the possibility that some veterans may become homeless because of the proposed changes.
“Does the VA believe that it is the intent of Congress to make veteran pensions more restrictive than Medicaid by disallowing the use of trusts and annuities as legitimate long-term care needs planning tools? Medicaid allows such planning,” Toomey wrote in a Feb. 16 letter to the VA.
Toomey also asks why the VA is proposing a three-year look-back period when Congress did not move the measure out of committee.
Collier straight-up disagrees with the VA, saying veterans are going to bear the brunt of a proposed policy change that contradicts the long-term care planning that veterans were encouraged to do under the Pension Protection Act of 2006.
“The proposed rule is 100 percent in conflict with Congress’ intent to encourage people to use their own assets for their own care,” Collier said.
The VA proposal imposes a three-year “look-back” period on gifts and other transfers, and creates a maximum 10-year penalty waiting period for people making those transfers, according to Collier’s blog post NAELA’s website.
“The rule also imposes myriad other new restrictions that includes capping the amount of home health expenses the veteran can deduct to qualify,” Collier writes.
Veterans receiving the benefits are “wartime” veterans who served on active duty for no less than 90 days, with at least one day during a wartime period.
For more advice about the proposed VA changes and how they might affect clients, Collier suggests advisors contact Dale Krause at Krause Financial Services and Donald A. Quante, president at America’s First Financial.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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