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.