Constant vigilance is important in any estate plan involving Veterans benefits. Earlier this year, the Department of Veterans Affairs (VA) published a proposed rule to amend its regulations governing entitlement to certain pension benefits.
Why is VA proposing changes now to an institution designed to assist wartime Veterans, their surviving spouses, and their children? VA specifically states it plans to change pension rules under the Veterans’ and Survivors’ Pension Improvement Act of 1978 because “we have received information that, under current regulations, claimants who are not actually in need may qualify for these needs-based benefits.” VA further notes that pension changes will go beyond administration of this particular Act, stating, “[f]or clarity and consistency, some of the changes we propose would apply to other needs-based benefits as well.”
Some of VA’s proposed changes, if implemented, could throw a huge monkey-wrench in your benefits calculations. Among the more disadvantageous proposals appear to be the following:
- New Definition of “Net Worth.” The present “net worth” calculation methodology is admittedly complex. VA’s proposal simplifies the calculation, but not in favor of most Veterans. Instead of assessing income, age, health expenses, and assets, VA proposes to define “net worth” as yearly income plus so-called “countable” assets. In a new twist, if your residential lot is over two acres, VA proposes to consider your primary residence as a “countable” asset.
- New “Net Worth” Limit. Using the new, expanded “net worth” calculation, VA would cap “net worth” at an amount equal to Medicaid’s maximum Community Spouse Resource Allowance (CSRA). Right now (2015), the CSRA is $119,220.
- Penalty Period for Transferring Assets. Now you know why the new proposed definition of “net worth” is important. VA wants to assess a penalty period if you or your spouse transfer any assets out of your names (e.g., into a protective trust) within 36 months prior to the date of application for benefits. In addition to the proposed 3-year “look-back” period, VA may impose a more draconian 10-year “look-back” period if they suspect transfer of assets occurred to qualify for a VA pension.
As written, the proposed rules appear to penalize a Veteran for creating and funding a trust – for any reason. Since there currently is no VA benefits-related penalty for transferring assets to protected trusts, now may be a good time to discuss estate planning, before new, prejudicial rules go into effect.
Common estate-planning scenarios for Veterans and their families include cases where Veterans die while their claims for disability compensation benefits are still pending. What happens then? What happens under VA’s new system if you moved assets as the result of a divorce? What happens to your children if your ex-spouse re-marries and leaves all assets – including ones gained from you – to his or her new spouse and family? In that scenario, will your children still be eligible for benefits under VA’s new pension rules?
Planning is the answer to these and other difficult pension-related challenges. Working with a knowledgeable professional can help you make decisions about your estate which will have effects in your lifetime and after. Since VA’s proposed amendments to current aspects of pension benefits change the rules just when you need certainty the most, consider obtaining assistance from a VA-accredited professional.
If you have questions regarding VA-administered pension benefits, contact The Law Office of Robert B. Goss, P.C. at: https://www.attorneyforveterans.com/contact-us.html