In September of 2018, the Department of Veterans Affairs (VA) released new rules for non-service connected disability pensions. These are needs-based pensions that provide tax-free monthly monetary benefits for disabled and elderly veterans or their surviving spouses. These pensions include the following: the Basic Veterans Pension, Survivors Pension (also referred to as the Death Pension), Aid & Attendance Pension, and the Housebound Pension. These new VA rules, which include a Look Back Rule and a set, became effective October 18, 2018. While these rules were first proposed back in 2015, unlike with Medicaid, the VA has never had a look back rule or set net worth limit until now.
What is the VA Look Back Rule?
The VA look back rule, also referred to as a look back period, establishes a period of 36-months (3 years) in which the VA “looks back” on all asset transfers made for less than they are worth. The look-back rule is a huge change from how asset transfers were handled in the past. Previously, there was no VA look back period, nor was there a penalization period for gifting/selling assets for less than fair market value. However, with this new rule, the 36-month look back period begins the date of one’s VA pension application, dating back three years. If one is found to be in violation of the look back rule, a period of VA pension benefit ineligibility (up to 5 years) will be the penalty.
This new look back rule is intended to prevent veterans and surviving spouses from gifting assets or selling them for less than they are worth in order to meet the new net worth (asset) eligibility limit of $127,061 for pension applicants.
How the Look Back Rule Impacts the Net Worth Limit
With the implementation of the new look back rule, another new rule is very important to mention. In previous years, there has been no established net worth limit set by the VA. However, it was previously advised that a veteran or surviving spouse have assets no greater than $50,000, and a veteran with a spouse not have assets over $80,000. That said, with the new rule, the VA has set a firm asset limit of $127,061 for 2019. This figure, which will include the assets of one’s spouse (if married), will increase annually as Social Security benefits are increased.
Net worth includes checking, savings, and money market accounts, mutual funds, and stocks. Some assets are not counted towards the new net worth limit of $127,061, and include one’s primary home on up to 2 acres of land (acreage in excess of 2 acres will be counted towards one’s net worth), household goods, a personal vehicle, and personal items, such as clothing.
Another important note, the new VA rules also indicate that income is to be considered part of one’s net worth. Therefore, one’s monthly income is multiplied by 12 and added to one’s net worth. For example, if a veteran or surviving spouse receives $1,200 / month in income, $14,400 ($1,200 x 12 = $14,400) will be added to one’s net worth. However, one can deduct un-reimbursed medical expenses (meaning they are not paid for by insurance) from their income, effectively lowering one’s income to be applied towards one’s net worth. Examples of un-reimbursed medical expenses include insurance premiums, in-home care, and assisted living / nursing home costs.
What if I Have Violated the Look Back Rule?
A violation of the 36-month look back period can result in a penalty period of up to 5 years. Said another way, one can be ineligible for VA pensions for as long as 5 years. However, there is a loophole for those who have violated the look back period. If they are able to get their assets back prior to pension application, or within 60 days of VA determination that the penalty period was violated, the penalty period can be reconsidered. Even a partial recuperation of assets can result in recalculation of the penalty period. This means that the penalty period can be reversed, either fully or in part when an applicant is able to get their assets returned to him/her. Candidates concerned they may have violated look back rules may wish to Consult with our office to see what may or may not be done at this point.
Confused? Contact us here at Beyer, Pongratz and Rosen, a Professional Law Corporation, to find out how these new rules may apply to you or your situation.