Congress to Veterans: “Thanks for Your Service. Now Pay for Your Own Long-Term Care”

By: Mike Anthony, JD |        email:[email protected]      

            At a time when hardly anything gets passed in Congress, it seems rather ironic that on Veterans Day 2013 I can report that a bill including a 3-year look back on gifting passed the US House of Representatives on October 28, 2013.

            HR 2189 imposes a 3-year look back period on all transfers of assets when determining eligibility for the VA Aid & Attendance and Homebound pension benefit.  It considers a transfer “a disposal of a covered resource for less than fair market value if such transfer reduces the amount in the corpus of the estate of the veteran or, if the veteran has a spouse, the corpus of the estates of the veteran and of the veteran’s spouse.”

            The bill will head to the Senate where passage is uncertain but likely.

            This law, if enacted, creates a rather large penalty for veterans because the ineligibility period is calculated based upon the total amount of gifts or uncompensated transfers, which is then divided by the total amount of benefits.

            For example, a Veteran gives away $50,000 to his children and two years later has a stroke and needs the VA Aid and Attendance pension in order to help pay for his homecare.  Typically, he would just file a claim if he was eligible and receive a monthly benefit of $2,054 (2013 figures).  Under the new law, the $50,000 transfer would create a penalty period of roughly two years of ineligibility if they apply.  In this case, the veteran would be better waiting out the look back period.

            This bill threatens to penalize veterans worse for transfers under VA than the law does under Medicaid. Medicaid looks back five years instead of the three proposed for the VA pension benefits, which you would think makes the VA benefit less onerous.  But a similar penalty under Medicaid for a $50,000 transfer would only be about 7 months.  Medicaid bases its transfer penalties on the cost of care and not the value of the benefit – nearly tripling the penalty period!

            Either way, the veteran in need of benefits will be out of luck for help from the VA if they’ve transferred any resources.  They will be forced to apply for an undue hardship waiver, similar to Medicaid, which is only loosely defined in the statute.

            All VA benefits planning must involve Medicaid Planning pre-planning because most VA cases transition over to Medicaid at a certain point.  At present, Medicaid has a transfer penalty while the VA does not.  In the future if this bill is enacted, planning will need to take into account the 3-year VA penalty period and the 5-year Medicaid penalty period when determining what types of planning techniques are appropriate.

            And there’s likely to be a lot of confusion surrounding this issue as it becomes clearer what the VA will accept as a viable rationale for approving an undue hardship request or what types of asset conversions they will deem to be transfers.

            A silver lining is that some annuities used to help restructure assets so that a veteran can help pay for care and get the Aid and Attendance pension do not reduce the value of the veterans estate and thus are not likely to be considered penalty-causing transfers.  However, these must be done with great caution and with Medicaid eligibility planning in mind since their rules are far more stringent.

            Did you already know about this new law? Or is this the first time you heard about it?  If this is the first time, then you need to be working with someone who’s on top of Medicaid Planning and VA planning developments.  Our team can help you with all of your Medicaid Planning and coordinated benefits cases. Our team has a comprehensive support for attorneys, financial advisors, geriatric care managers, and CPAs to help them deal with complicated cases.  We offer support for case design strategies, mentoring on benefit eligibility issues, assistance with Medicaid and VA Compliant Annuity suitability, and help with marketing your planning services.

            We go beyond just Medicaid and VA Compliant Annuities and provide a whole range of assistance with your cases.  If you come across a case where you want to where a comprehensive approach can help your client with a crisis or to plan ahead, we can show you the right way to make that happen and help you (and your client) avoid the ever-increasing pitfalls created by legislation like this.

            Whether you’re looking to expand your practice skills or wanting to help your existing clients cope with difficult times without being financially ruined, you could benefit from my clear and concise Medicaid planning course.  It covers a whole section on coordinating veterans’ benefits with Medicaid benefits.  It’s designed to help even the novice of advisors grasp the difficult planning concepts.  If you don’t know how Medicaid and Veterans benefits interact with the advice you’re already giving, you need to learn this subject.

            My Medicaid Planning Guidebook is an indispensable desk reference as you deal with long-term care planning.  It includes a whole chapter on coordinating the VA Aid & Attendance benefits with Medicaid benefits.

            If you’re interested in pursuing the Certified Medicaid Planner™ designation, ask me how becoming a CMP™ can set you apart in the field and demonstrate your competence in the planning arena.

            If you’d like the full text of the proposed law, email me at [email protected].