If you are a wartime veteran, or a family member of a wartime veteran, you have probably heard conflicting information regarding proposed changes to the eligibility rules for the Aid & Attendance Pension (A&A)
offered through the Department of Veterans Affairs (VA)
. This is a brief summary of the eligibility requirements for the current A&A
rules, and an update on the proposed rule changes.
Eligibility for the Aid & Attendance Pension
is a tax-free monthly benefit paid to wartime veterans or their spouses/dependents. The benefit ranges from $8,000-$34,000/year, depending on a number of factors, including the following eligibility requirements:
1. Service: applicants must be “wartime” veterans (or their spouse/dependent). “Wartime” means at least 90 consecutive days of active duty service, at least 1 day of which was during a recognized wartime period.
2. Health: generally, applicants must be “disabled” (i.e. they must be 65 or older and require assistance with at least 2 “activities of daily living”) – regardless of whether they are at home or in a healthcare facility;
3. Income: applicants’ income must be significantly reduced by qualified recurring monthly medical expenses; and
4. Assets: applicants may not have significant assets.
On January 23, 2015, the VA published a proposal to significantly change the rules regarding eligibility for A&A benefits
. Proposed changes included:
• Establishing a “bright line” rule for net worth limitations;
• Establishing a 3-year “look back” period for asset transfers prior to application for benefits;
• Imposition of a penalty period (of ineligibility for benefits), with respect to any improper transfers of assets during the “look back” period; and
• Limitations on qualifying medical expenses.
The proposal was largely aimed at counteracting perceived abuses of the program (i.e. applicants sheltering significant assets in order to qualify for the benefit
). However, the statistics do not support these concerns. 2015 U.S. Census data shows approximately 19 million military veterans alive in 2014. VA
utilization data from 2012 shows only 315,000 recipients of A&A benefits
. In other words, only 2% of veterans receive the A&A benefit
The health and service requirements are non-negotiable, and, the purpose of the A&A benefit
is to assist veterans with significant health expenses. It is relatively unlikely that individuals with significant liquid assets (available to pay significant health expenses) would elect to relinquish complete control of these assets to gain additional tax-free income – especially when significant assets might generate similar amounts of income (though not tax-free).
Following the release of the VA’s
proposal, there was a public comment period (in the spring of 2016), during which the proposed changes were heavily scrutinized and challenged by attorneys and veterans’ advocacy groups. As a result, the VA
has gone “back to the drawing board”, and recently indicated that the final changes will not be released prior to April 2017.
So what does this mean for you? There is still time to plan for VA
eligibility under the current rules – which are far less restrictive than those which are likely to be promulgated after April 2017. For example, establishing a VA
-planning trust now will likely not be retroactively subject to the proposed 3-year “look back” period. Additionally, individuals in independent-living facilities are presently able to use certain planning techniques to achieve eligibility, which will not work after April 2017.