More on the VA Pension Benefit Rules

In November of 2018, we wrote about the new VA Pension Benefit Rules that are now in place as of October 18, 2018. As stated in our last article, these new rules are designed to make it much clearer for claimants to understand the financial eligibility rules when applying for the VA benefit, specifically the VA Aid and Attendance Benefit, that assists eligible Veterans and their surviving spouses with paying for long-term care.

Last month, we highlighted the new Net Worth and Asset rules. In this article, we will cover the new Look-Back and Penalty Period.

Look-Back and Penalty Period:

In the past, an applicant applying for the VA Aid and Attendance benefit could transfer or gift assets, apply for the VA Aid and Attendance benefit, and become immediately financially eligible for benefits, despite the fact that he/she had recently given away assets in his/her name. The ability to transfer assets in this manner, without penalty, was very different than the Medicaid eligibility requirements, which currently have a five (5) year look back period.

The new rules have introduced a look-back and penalty period. The look back period is currently set at three (3) years. The look-back is triggered by the VA’s receipt of an original claim or new claim following period of non-entitlement. This means that if an applicant gives away or transfers assets within three (3) years prior to making an application then he/she will be deemed financially ineligible for the VA Aid and Attendance benefit (unless he/she cures the gift/transfer).

It is important to note that the new look-back and penalty period will not apply to transfers made prior to October 18, 2018. It is also important to note that the penalty period, or, the period of time for which an applicant will be deemed financially ineligible, will be maxed out at five (5) years.

The new penalty period will start the month after the transfer is made. To calculate the penalty period, the VA will determine the fair market value of the asset transferred, divide by the maximum annual pension rate, and then round down, if needed. In 2018, the maximum annual pension rate is $2,169.00.

Another new concept introduced by the rules is the term “covered assets.” A covered asset is any asset that is part of the applicant’s Net Worth that, had it not been transferred, would have caused the claimant’s assets to be over the Net Worth eligibility limit of $123,600. Therefore, if an applicant has a Net Worth of less than $123,600 and transfers some or all of those assets prior to making a claim for benefits then he/she will not be subject to a penalty period because he/she did not transfer a “covered asset.”

As with Medicaid, some transfers will not be penalized, such as transfers made to a trust exclusively for the benefit of an incapable child who is under the age of 18 or transfers as the result of fraud or unfair business practices (i.e. if the applicant purchases an improper financial product on the advice of a professional).

Finally, the new rules provide for a way for applicants to “cure” a gift or transfer. If the applicant had made a gift or transfer he/she may cure this by getting the asset back, provided that this “cure” must be done (1) before the claim is filed or (2) within sixty (60) days of being notified of the penalty. The applicant must provide evidence of the cure no later than 90 days after notice of the VA’s decision.

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New VA Pension Benefit Rules

As of October 18, 2018, the new VA Pension Benefit Rules are now in place. These new rules make it much clearer for claimants to understand the financial eligibility rules when applying for the VA benefit, specifically the VA Aid and Attendance Benefit, that assists eligible Veterans and their surviving spouses with paying for long-term care.

The stated intent of these new rules is “to maintain the integrity of the pension program” and respond to GAO recommendations, which specifically included making people more aware of the pension benefits. In this article, we will cover the new Net Worth rules. Next month, we will cover the new look-back and penalty period.

Net Worth and Transfer Rules:

In the past, unlike the federal Medicaid program, the VA pension program did not have definitive eligibility figures. With these new rules, there is finally an exact, maximum amount of assets that an applicant may own in order to be eligible for benefits. Net Worth for VA pension purposes will be equal to the maximum community spouse resource allowance (“CSRA”) amount, which is currently $123,600. The CSRA is scheduled to increase each year and follows the same increase as the Social Security benefit increase.

The new Net Worth CSRA of $123,600 is equivalent to the current Medicaid “Community Spouse Protected Amount” or “CSPA.” However, unlike Medicaid, for which the CSPA is the amount protected for the “Community Spouse,” for married couples, the CSRA applies to all applicants, regardless of marital status. This means that a single individual Veteran can have $123,600 of assets in his/her name and still be eligible for the VA Aid and Attendance benefit.

It is important to note how “Net Worth” is defined for VA purposes. Net Worth includes all income and assets. The term “assets” is defined as the fair market value of all property owned by claimant and any dependents minus any mortgages and other encumbrances. This means that the assets of any dependents, such as children or parents, will be counted when calculating Net Worth. Including the assets of dependent children and parents in the calculation of Assets is very different than the Medicaid program which does not include assets that do not belong to the applicant or applicant’s spouse.

The home that the applicant resides in will be excluded from the asset calculation and not considered part of the applicant’s Net Worth. Additionally, the applicant may keep a “reasonable lot area,” meaning, not more than 2 acres, unless the additional acreage is unmarketable. However, unmarketable is not defined in the new rules.

Also excluded from the calculation are personal effects and family transportation vehicles. Since “vehicles” (plural) is used, it seems that perhaps the applicant and dependents may be able to keep more than one vehicle without the value of the additional vehicles adding toward the total asset amount.

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Allison and Nicole named to Super Lawyers® Rising Star List

Allison DePaola-Drozd and Nicole Camporeale have again been named to the 2018 New England Super Lawyers Rising Stars list! Nicole has made the Rising Stars list for the second year in a row. Allison has been named to the Rising Stars list consecutively since 2015. Allison and Nicole were nominated by attorneys outside of our firm and qualified in the top 2.5% of New England attorneys under 40 years of age and in practice for 10 years or less. We also extend our congratulations to the other recipients. You can view the full list in Connecticut Magazine or online at www.digital.superlawers.com

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New VA Pension Benefit Rules

Effective as of October 18, 2018, the VA has made changes to the Pension Benefit Rules in an effort to “maintain the integrity of the pension program.” These changes will impact Veterans and their surviving spouse’s eligibility for the VA Pension and the Veteran’s Aid and Attendance benefit that helps Veterans and their surviving spouses with long-term care assistance. Here are some relevant changes to keep in mind if utilizing the VA Aid and Attendance benefit as part of a long-term care plan:

Net Worth: Net Worth includes all income and assets and now has a clear maximum cap of $123,600.00 in 2018.

Assets: An applicant’s assets will be calculated by using the fair market value of all property owned by the claimant and any dependents, less mortgages or other encumbrances.

Asset Exclusions: Specifically excluded from assets are: the home, plus two acres, and personal effects.

Look-Back Period: Prior to 10/18/18 there was no look-back period, meaning, an applicant could transfer assets and immediately apply for the VA benefit without penalty. Now, there will be a 36-month look-back period triggered by the receipt of an original claim or a new claim following a period of non-entitlement. However, this look-back period will not apply to transfers made prior to 10/18/18.

“Covered Asset” Transfers: Only “covered assets” that are transferred will be penalized. A covered asset is considered to be an asset that was part of the claimant’s net worth and, if not transferred, would have caused net worth to be over the limit.

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Is a Living Trust right for you?

We all have seen articles and advertisements in newspapers inviting the public to seminars to discuss something called a “Living Trust”. Often the article or the advertisement suggests that a Living Trust is an essential requirement of any estate plan. Although that sometimes is the case, it is not always the case.

Is a Living Trust right for me and my family? As with many legal questions the answer is an annoying “it depends.” It depends on your goals, your objectives, and the dynamics of your family. Here are 4 factors to consider when assessing whether a Living Trust is right for you.

Avoiding Probate. For many people “avoiding Probate” is important. Although administering an estate through the Probate Court usually moves smoothly when handled by someone who knows what to do, many people don’t want their family to have to deal with a Probate Court process.

So, if one of your goals is “avoiding the Probate Court” a Living Trust can help you accomplish that goal. Anything you put into the Living Trust while you are alive (called “funding” the Trust), can be controlled, administered, and transferred by your successor Trustee, after your death, without needing any help from the Probate Court to make that happen. Although your family still will need to file a Connecticut Estate Tax Return with the Probate Court (mandatory for any deaths occurring after January 1, 2005), they will not need help from the Probate Court to get control of the assets that are already in the Living Trust.

Privacy. Another reason people sometimes like a Living Trust is that it is not part of the public record on file with the Probate Court. This means that no nosy neighbor can check to see what you may have put into the Living Trust. It also makes it harder for a disgruntled family member to contest what you have done.

Incapacity Planning. Some people like the fact that the Living Trust provides more detailed restrictions and offers greater guidance for how to manage assets in the event of incapacity, as opposed to using a Durable Power of Attorney Instrument.

Avoiding “Ancillary Probate.” If you are a resident of Connecticut and own real property in another state, a Living Trust can be a useful tool for planning to avoid the time and expense associated with “ancillary” probate in another State.

As you can see, there is a lot to be said for the idea of using a properly funded Living Trust as one of your estate planning documents. However, sometimes what you want to accomplish, can be accomplished through easier, more cost-effective mechanisms. So, is a Living Trust right for you and your family? A knowledgeable advisor with information about you, your family, and your goals can help you determine what works best for you and your family.

If you are currently considering a Living Trust, and want more information to help you make an informed decision, feel free to call or email us at office@flomandepaola.com. We will send you a complimentary copy of our “7 Myths and Truths About Living Trusts.” We also would be happy to meet with you to help you make an informed decision. There is no charge for the initial meeting.

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Welcome, baby Austin!

Please join us in congratulating Allison and her husband, Scott, on the birth of their son, Austin Michael Drozd. Austin was born in September and is a healthy, happy baby. Please note that Allison has changed her last name to match Scott’s and baby Austin’s last name and will now be using Allison DePaola-Drozd.

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Seven Myths & Truths about Living Trusts

We posted this blog post many years ago, but, it is worth repeating.  We often get questions from clients and colleagues who are confused about what exactly a Living Trust is and the advantages and limitations of incorporating a Living Trust in an estate plan.

A “Living Trust”, also known as a “Revocable Trust,” often is advertised as a way to avoid probate and quickly transfer assets to family members upon death. However, there are many misconceptions about Living Trusts:

Myth 1: A Living Trust will avoid statutory Probate Court fees.

Truth 1: The assets in a Living Trust still are considered part of your gross taxable estate and therefore are subject to statutory Probate Court fees.

Myth 2: A Living Trust will reduce estate taxes.

Truth 2: The assets in a Living Trust still are considered part of your gross taxable estate; therefore, a Living Trust does not reduce your estate tax bill.

Myth 3: A Living Trust avoids the need to file a Connecticut Estate Tax Return.

Truth 3: Even with a Living Trust, a Connecticut Estate Tax Return must be filed with the Probate Court.

Myth 4: A Living Trust will protect assets from creditor claims and lawsuits.

Truth 4: Assets in your Living Trust are available to your creditors while you are alive.

Myth 5: A Living Trust protects your assets in the event long term care expenses are incurred.

Truth 5: A Living Trust provides absolutely no protection of assets if long term care is required; assets in your Living Trust still are considered owned by you.

Myth 6: The Probate Court can be completely avoided with a Living Trust.

Truth 6: Some involvement with the Probate Court cannot be completely avoided in Connecticut; at a minimum, a Connecticut Estate Tax Return must be filed with the Probate Court even if all of your assets are in the Living Trust.

Myth 7: Everyone’s estate plan should include a Living Trust.

Truth 7: A Living Trust is not necessarily for everyone. As with every estate plan, a Living Trust should be used only if it is the best tool to meet the specific needs of you and your family.

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It’s time to send the kids back-to-school! Do your college-age children have the proper legal documents in place?

  • Planning for adult children. Your children are now 18 and going off to college. It is an exciting time where they will have their first experience with independence. As you plan for your children to start school, move away, and begin this new chapter, have you even wondered what would happen if your child had a medical emergency? Now that they are over 18, you have no legal right to talk with their doctors or receive information about care they are receiving. This could quickly become a nightmare for most parents!
  • Health Care Instructions (AKA Living Will). Having your adult children sign Health Care Instructions appointing you as their Representative, will allow you the legal authority to be involved in medical decision making and speaking with doctors on your child’s behalf.
  • Power of Attorney Instrument. Independently managing finances for the first time can be a daunting task for young adults. Having your child appoint you as their Agent will ensure that you can easily assist with their finances, or step into their shoes if they were unable to manage finances for themselves.
  • Ensure you are not left in the dark. By taking the easy step of having your adult child execute these documents before going off to college, it will provide the family with peace of mind and the ability for you to be involved in health care and financial decision making, in the event that your child ever faces a medical emergency.
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What should my family do if I need help with decision making and don’t have a Power of Attorney Instrument or Health Care Instructions?

You may be surprised to learn that your family will need to initiate a conservatorship proceeding through the Probate Court.

  • Conservatorship, in general. If there comes a time that you need help making financial or health care decisions, and you have not previously signed a Power of Attorney Instrument or Health Care Instructions, your family will need to ask the Probate Court to appoint someone to make decisions for you. That person is called a conservator.
  • Conservator of estate. A conservator of your estate is authorized to make financial decisions for you. Examples include routine activities such as endorsing checks payable to you and paying your bills. But, with Probate Court approval, your conservator can engage in more extraordinary activities such as selling your home, making withdrawals from your retirement account, and making gifts of assets to family members.
  • Conservator of person. A conservator of your person is authorized to make personal decisions for you. Examples include consenting to surgery, authorizing the release of medical records, deciding on the best place for you to live, and accessing/making entries in your social media accounts. The conservator of your person can be (but does not have to be) the same person who is the conservator of your estate.
  • Voluntary conservatorship. Connecticut Statutes and Probate Court Rules allow you to file an Application for a Voluntary Conservatorship. The Application tells the Probate Court you need help with decision making and asks the Probate Court to appoint the person/people you name in the Application to help you. In most cases, the Probate Court will appoint the person/people you have chosen.
  • Involuntary conservatorship. If a third party thinks you need help with decision making, that third party will file an Application for an Involuntary Conservatorship. An Involuntary Conservatorship cannot be established without medical evidence that you need help with decision making. If there is disagreement about who should be appointed as your conservator, the Probate Court will hear evidence and make a decision based upon what appears to be in your best interests.

 

 

If you are interested in learning more about conservatorship proceedings, please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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As Mother’s Day approaches, you may wonder, what does a legal column have in common with a Dr. Seuss book?

More than you may think! 

  • Do you remember the Dr. Seuss book “Horton Hatches the Egg”? Horton, an elephant, is asked by Mayzie, a bird, to sit on Mayzie’s egg while Mayzie does a few errands. Well, Mayzie ends up taking off on a permanent vacation to Florida, leaving Horton stranded on the egg. Horton, an elephant of his word, sticks it out through many trials and tribulations, until the egg is hatched. Out comes a creature that is part bird and part elephant. So, who is the mother?
  • Assisted reproductive technology. In 2018, there are many ways to become a mother. Examples include intrauterine insemination, egg and sperm donation, in-vitro fertilization, intracytoplasmic sperm injection, and gamete intrafallopian tube transfers.
  • Keeping track of the players. The genetic mother is the mother whose gamete has been fertilized. The carrying mother is the mother who carries the fertilized gamete (embryo) until delivery. The mother who ends up as the “parent” of the baby, however, might be a third mother who entered into a gestational agreement with the other “mothers.” So, is the mother Horton or Mayzie?
  • How does this relate to estate planning? Your Will and Living Trust (if applicable) should be clear about what you mean when you use terms such as “child,” “grandchild,” “heir,” “descendant,” or “lineal descendant.” You don’t want your family to be arguing about whether Horton or Mayzie is the mother. Clearly defined terms in your estate planning documents almost always will diffuse a disagreement about what was intended.

If you are interested in learning more about the intersection between assisted reproductive technology and estate planning, please visit our website and read our blog for recent posts.  For advice specific to you or your family, please contact the office.  We would be glad to meet with you for a no hassle, no charge initial consultation, no matter how long it lasts.

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