With Halloween tonight, we officially put the wraps on October and get ready for November. Aren’t we all ready to start shopping for the holidays?
November is a very American month, with two holidays paying tribute to important people and moments in our country’s history. And we will start with Veteran’s Day, just two weeks away. First things first, if you are a veteran, I want to thank you for your service. Our country would not be what it is today without people like you.
Secondly, I want to talk about the Department of Veterans Affairs. I haven’t done a lot of VA work lately, but I like to stay informed on the goings on. And, like anything else with estate planning & asset protection, it’s important for you to stay informed, too. There have been a lot of changes to the VA’s Veterans Aid and Attendance benefits that have recently gone into effect or will soon go into effect. I want to briefly discuss each one:
Starting earlier this month, the maximum assets a VA pension claimant can have is $123,600. That is in line with Medicaid’s Community Spouse Resource Allowance.
The asset limit stated above is determined from a sum of the claimant’s assets and their annual income, minus health care expenses. The annual income portion is new for this year, which may complicate things. The calculation still does NOT include primary residence, car, or personal effects.
Look Back Period
Like Medicaid, those looking to file for the pension benefits are subject to a lookback period where gifts and asset transfers will be reviewed. That period is three years. Not all transfers will cause a penalty in this provision, provided the claimant was under the maximum asset limit with or without the transfer.
Annuities & Trusts Loopholes
Beginning October 18th, the VA considers a transfer “less than market value” will trigger a penalty. What do they consider “less than market value”? Any asset transfer, investment, or purchase of financial instrument to bring assets below the maximum limit where the claimant does not have the full ability to liquidate the entire balance for their own benefit in the future. This is a very technical definition, but the real-world impact is that the provision limits the use of certain annuities and trusts.
Calculating The Penalty
All this talk about penalties means it’s a good idea to know what the penalty would be. The penalty is calculated by dividing the covered asset by the Maximum Annual Pension Rate… or $2,169.
Restriction on Primary Home Lot
While a claimant will not have the value of their home factored into the maximum allowable asset, the size of the home allowed is limited. The home can be situated on a lot no larger than two acres, unless additional acreage is unusable. And if the home is sold, all proceeds from the sale count as assets minus any amount used to purchase a new home within the same calendar year