Understanding Veterans Affairs Pension Benefits and How They Can Pay for Elder Care Today
By Julianna M. Malis, LL.M Anacapa Estate Planning & Elder Law
Many veterans believe that government benefits are only available if they were wounded in combat or suffer from a disability related to their service. This is simply not true. One of the most valuable benefits available to veterans is also one of the least understood and most underutilized—the Veterans Pension Program.
Veterans and their spouses may be eligible for a valuable program known as Veterans Pension. For many veterans who are just getting by on Social Security and withdrawing as little as possible from their retirement money, this significant monthly stipend from the VA can make a major difference in their quality of life.
An increased pension is available if the veteran requires the aid and attendance of another, or is housebound. While every family situation is unique, an eligible veteran can receive over $26,000 a year tax-free for assistance with medical expenses and long-term care. An eligible veteran’s widowed spouse can potentially receive over $14,500 per year tax-free. Another important aspect of the Aid and Attendance benefit is that it can allow an eligible veteran or widowed spouse to pay anyone, including his or her child, for home care. It can also be used to pay for professional care in the home, assisted living, nursing home care, insurance premiums, prescription drugs, and co-pays.
The Aid and Attendance benefit can help an eligible veteran or widowed spouse live at home for as long as possible while still receiving the care he or she needs and protecting hard-earned assets. In addition, depending on the person’s specific circumstances, planning ahead can help the veteran double or triple the time they can afford to live in an assisted living facility, while at the same time preserving Medi-Cal eligibility if a future nursing home stay is needed.
The challenge of obtaining veteran pension benefits from the government can be confusing for many people and recent rule changes can also make it harder for beneficiaries to know what benefits they can collect – and how to collect them. The latest major change in veteran pension benefits took effect October 18, 2018, when the Department of Veterans Affairs (VA) implemented comprehensive new rules regarding the eligibility of applicants applying for a pension.
Potential beneficiaries need to be aware of the 2018 changes to this program. A VA- accredited elder law attorney can help veterans and their spouses by discussing the new requirements to obtain a VA pension as well as veterans’ healthcare options and the tax consequences of those options. A VA-accredited elder law attorney can also help veterans and their families protect assets using wills, trusts and other estate planning strategies, as well as implement a plan for each individual’s situation.
Veterans may qualify for tax-free income from the VA if they meet certain criteria, including: they are 65 or older or 100 percent disabled; they served at least 90 days on active duty with one day of active duty during eligible wartime period; they need help with activities of daily living such as dressing, bathing, toileting; they are currently paying for, or need, nursing home care, assisted living care, or in-home care. The veteran’s discharge from the military has to be other than dishonorable.
VA benefits are available to surviving spouses of wartime veterans who are disabled and/or have additional medical needs. There are also financial limitations to qualify.
Here’s a summary: In addition to the minimum active duty, wartime service, and age or disability requirements, the VA will decide if an applicant is “in need,” based on an applicant’s net worth, currently set at $123,600. This number will increase annually with the increase in Social Security benefits. The current maximum net worth amount is set at $127,061. To determine net worth, assets are combined with gross annual income. Out-of- pocket medical expenses can be factored in to reduce income. The applicant’s home is generally excluded but there is a two-acre limit for the homestead.
If the veteran’s net worth is too high to qualify, there are legal strategies such as making qualified purchases and accounting for certain medical expenses that can help get an applicant’s net worth amount down to the level needed to get the veteran qualified for benefits. The veteran can “spend-down” (reduce) assets by buying goods or services for fair market value as one strategy. Transfers to a non-grantor irrevocable trust may also be used for VA pension purposes, but only where the grantor has no access to income or principal. However, applicants cannot simply transfer money or assets to relatives to reduce their net worth. Due to the new rules implemented last year, there is now a “look-back” period of 36 months when applying for a needs-based pension.
There are a few exceptions to this new transfer penalty rule. For instance, there’s no penalty if the transfer was made to a trust established for a child who was not able to support himself or herself before turning 18. There’s also no transfer penalty if the applicant’s net worth would have been below the net worth limit already.
Veterans who serve our country honorably deserve all the benefits they are eligible to receive so they can live their best life possible in retirement. It’s the least our nation can do to thank these brave Americans.
Julianna M. Malis is the founder of Anacapa Estate Planning & Elder Law in Santa Barbara (www.anacapalaw.com). Accredited by the Department of Veterans Affairs, Julianna is an estate planning and elder law attorney who has been practicing law for over 20 years and member of ElderCounsel, WealthCounsel and the National Academy of Elder Law Attorneys. She also is a military spouse with a passion for veterans’ issues. Her husband, an Army officer, is a veteran of the war in Iraq and has served in the U.S. Armed Forces for almost 30 years. Anacapa Estate Planning & Elder Law is located at 1514 Anacapa Street, Suite A, Santa Barbara , CA 93101, (805) 946-1550. Visit www.anacapalaw.com.