New rules just put forth by the Department of Veterans Affairs (the VA) will make dramatic changes to the Veterans Pension, a tax-free benefit paid to low-income vets who served during a designated period of war. Some planners were surprised by the change, concerned that the new VA rules, which were published September 18th and become effective October 18th, will make it more difficult for veterans to qualify for benefits. Other experts including Rajiv Nagaich of AgingOptions say that the changes are overdue. “I’m not surprised at all,” says Rajiv.
VA Rules Generate 850 Comments
These rules changes were first proposed in early 2015. After the VA set forth the new rules, they held a public comment period during which the agency received input from more than 850 individuals and groups. Now at long last the VA rules changes are about to go into effect. (If you want to read the official explanation of this rules change, you’ll find a copy here on the website called Regulations.gov. We also found a clearer synopsis on this website called Advantage News. Here on the AgingOptions blog we’ll watch for other stories on this changing topic in the coming weeks so we can keep our readers and radio listeners posted.)
What’s the story behind these changes? There are two big modifications to the VA rules that will profoundly affect how many people will qualify. The first imposes what is commonly called a “look-back period” that regulates the practice of veterans giving away assets in order to qualify for benefits. The second sets what some call a “bright line” that determines the maximum net worth a veteran will be permitted to have to qualify for a pension. These changes, says Rajiv Nagaich, and their imminent effective date make it imperative that veterans who think they might have pension benefits coming get some expert advice, and quickly, or else they may lose their eligibility.
Let’s look closer at these two changes.
The 36-Month Look-back Period
Under the new VA rules, if you as a low-income wartime veteran are applying for a needs-based pension benefits, from now on the VA will want to know of any assets you’ve transferred to someone else for less than fair market value. As the article in Advantage News stated, “Any asset that was transferred for less than fair market value during the 36-month period immediately preceding the pension application will result in a penalty period, not to exceed five years. It is crucial to seek advice before making any transfers so you are not penalized.” Until now, there was no such look-back period in place for VA wartime service pensions.
The VA’s reasoning in setting this new ruling in place is straightforward. Since these pensions are intended to be needs-based, Veterans Administration officials say it is “reasonable” to require those with sufficient means to pay for all or part of their care. In the heavy language of government regulations, the new rules say that “A pension claimant must reasonably consume excessive net worth prior to receiving needs-based pension.” It’s no longer acceptable for someone with means to transfer assets in order to get below the approved net worth threshold to apply for a VA pension “leaving the Government to fund his or her maintenance.”
The “Bright Line” of Acceptable Net Worth
According to Advantage News, the new VA rules now allow a veteran applying for a pension to have a maximum net worth of $123,600, which is also the maximum community spouse resource allowance (CSRA) allowed by Medicaid. The VA says that this figure will increase each year along with the increase in Social Security benefits. If the veteran or other claimant has a net worth over the threshold and thus does not qualify for benefits, he or she can spend down assets by purchasing goods or services for fair market value. What’s more, as noted above, there is a short window of time between now and October 18th during which those applying for VA pensions might be able to take action to qualify even with a higher net worth. “The asset limit does not apply to those seeking benefits today,” says Advantage News. “There are strategies that are available that can qualify an individual for these needed benefits.” In other words, get some good advice immediately if you think either of these new provisions might affect your benefit application.
Safe Harbor Trust a Key Element
According to Rajiv Nagaich, the timing of this change to VA rules makes it imperative that qualifying veterans seek out a good retirement planner, and soon. “When it comes to protecting assets and qualifying for benefits,” he says, “a Safe Harbor Trust can be an absolute key to a good plan. I encourage vets and their families to contact us very soon so we can explain the options and put a solid plan in place.”
We think everyone, veteran or no, needs some objective professional guidance when preparing for retirement. Entering into retirement without a solid plan is like setting sail on the open sea without a chart: you can find yourself in dangerous waters very quickly. Instead, we encourage you to come experience a fresh approach to retirement planning by joining Rajiv Nagaich at an event we call a LifePlanning Seminar. A “LifePlan” is our name for an approach to retirement planning that is truly comprehensive, blending the key elements of your plan – financial, legal, housing, medical and family – into a seamless whole. This kind of planning also takes into account any government programs for which you might qualify, including VA and Medicaid benefits. There’s no other retirement plan quite like a LifePlan .
Your next step? Visit our Live Events page and find out the date, time and location of an upcoming LifePlanning Seminar that’s convenient for you. Then register online or give us a call. Invest just a few hours and come away with a fresh perspective on this exciting chapter in your life – retirement. Age on!