Congress is currently considering legislation that would implement a number of significant changes to the rules for eligibility for VA’s “Aid and Attendance” benefit. Those changes include - among others - an attempt to establish a clear maximum allowed net worth; a change in how income will be treated compared to assets; and an attempt to better differentiate which types of recurring expenses will be allowed to offset income. Apart from those changes, the most important change of all from our planning perspective would be to implement a look back period for asset transfers, similar to the look back period under the current Medicaid eligibility rules.
To date, VA has only considered an Aid and Attendance applicant’s current net worth in deciding a claim for benefits. Any transfers occurring prior to filing a claim are not investigated and are irrelevant for purposes of determining benefit eligibility. Hypothetically, if it were to meet their planning needs, a living veteran or the surviving spouse of a veteran would have the ability to gift away as much of their assets as they chose in order to immediately become Aid and Attendance eligible and they could then file a benefit claim immediately thereafter.
Sometimes our clients engage in planning that is specifically intended to protect their assets from the devastating costs of long term nursing home care. Under the Medicaid rules, any gifts made within five years of filing a claim could result in a penalty. Therefore, it would often be advantageous for those clients to obtain the Aid and Attendance benefit to help defray the costs of long-term care, while they wait for the five year Medicaid look back period to conclude before applying for Medicaid benefits. Another way in which Aid and Attendance is helpful is for clients who live in a private-pay assisted living facility who hope to make their assets last as long as possible before they run out of money and are forced to move into a nursing home. For people in that situation, bolstering one’s income with the Aid and Attendance benefit can help make their assets last as long as possible.
With the proposed changes, VA would begin to scrutinize Aid and Attendance applicants’ financial history for the three years prior to initiating a claim. Much like the Medicaid rules, the new VA process would establish a presumption that gifts made during the look back period were made for the purpose of becoming eligible for benefits. As a result, VA would impose a penalty in the form of a period of time during which VA would not make benefit payments even though the claimant is otherwise eligible.
There is no question that if the pending legislation is enacted, it will have a huge impact on planning for long term care. With this change it will become even more important for seniors, and anybody else worried about the costs of long term care, to engage in appropriate planning as soon as possible. Without the ability to rely on Aid and Attendance benefit income, it will become even more important to take steps to protect assets long before there is a need to start receiving skilled nursing care.
Please call us at 860-769-6938 if you have any questions about the issues presented above or if you care to discuss any other planning issues with us.
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