The Department of Veterans Affairs (VA) needs-based pension program is available to compensate veterans for non-service-connected disabilities. Like the VA compensation program, eligibility for the pension program is based upon disability. Unlike the VA compensation program, however, the pension program is also based on income and financial need. To be eligible for benefits, the veteran’s disability must be total and permanent, but need not be “service-connected.” There are three (3) levels of VA pension benefits available: (1) the basic pension, (2) “Housebound” benefits and (3) “Aid and Attendance” benefits. The VA pension program helps pay for unreimbursed medical expenses (not covered by Medicare or other medical insurance), and is useful to veterans who need assistance with activities of daily living. This blog contains many articles on VA pension benefits. For more information on VA pension benefits and the requirements to qualify, please click here.

Changes to the VA Pension Rules

Over three (3) years ago, in January 2015, proposed rule changes amending the regulations governing veterans’ eligibility for VA pensions and other needs-based benefit programs were published in the Federal Register. Although it has taken the VA over three (3) years, the new rules were published in the Federal Register today, and will be effective in thirty (30) days, on October 18, 2018.

The amended regulations mirror the Medicaid rules, as they require a net worth determination, establish a look-back period and impose penalties for asset transfers.  New requirements also identify the medical expenses which may be deducted from countable income for VA’s needs-based benefit programs. The new rules will make qualifying for VA pension benefits more challenging than ever.  

Net Worth

For purposes of entitlement to VA pension, countable net worth includes all countable assets plus annual gross income. Example of “net worth” calculation: A claimant’s assets total $117,000 and annual income is $9,000. Therefore, adding the claimant’s annual income to assets produces net worth of $126,000.

The term “countable assets” means the fair market value of all property that an individual owns, including all real and personal property, unless excluded under the regulations, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.

A veteran’s assets include the assets of the veteran as well as the assets of his or her spouse.

The new net worth asset limit is $123,600. This limit will be increased each year by the same percentage as the Social Security benefit amounts increase due to cost-of- living increases.

The VA will deny or discontinue pension if a claimant’s or beneficiary’s net worth exceeds the net worth limit.

A claimant may decrease assets by spending on items or services for which fair market value is received. Such purchases cannot be on any item that the VA considers to be a countable asset. One example of spending down assets would be the payment of medical expenses during a non-qualifying year, but other expenditures will also be acceptable; e.g. vacation expenditures, a pre-paid burial policy, purchase of a car, etc., provided that the expenditures are for the claimant or his/her spouse.

Asset Exclusions

Countable assets do not include the following:

Primary residence. The primary residence is exempt, regardless of where the claimant actually resides and regardless of the value of the residence; however, the residential lot area cannot exceed 2 acres. Anything over 2 acres would be countable in net worth. If the residence is sold after pension entitlement is established, net proceeds from the sale are a countable asset except to the extent the proceeds are used to purchase another residence within the same calendar year as the year in which the sale occurred. VA will not subtract from a claimant’s assets the amount of any mortgages or encumbrances on a claimant’s primary residence.

If the residence is sold within the three-year look-back period, the net proceeds can be used to purchase another home of equal or greater value OR to purchase other items or services without falling into the penalty period. In cases where the residence is sold after pension is in effect and the claimant spends down the proceeds before December 31st or purchases another home of equal or more value before December 31st, pension will remain unaffected.

Personal effects. Value of personal effects suitable to and consistent with a reasonable mode of life, such as appliances and family transportation vehicles.

Look-Back on Asset Transfers

The “look-back period” refers to the 36-month period immediately preceding the date on which VA receives either an original pension claim or a new pension claim after a period of non-entitlement. This look-back period does not include any date before October 18, 2018, or 30 days after September 18, 2018, the date the new VA rules were published in the Federal Register.

Penalty Periods

The “penalty period” means a period of non-entitlement for VA pension benefits due to the transfer of an asset.

Penalty periods and calculations. When a claimant transfers an asset during the look-back period, the VA will assess a penalty period, not to exceed 5 years. However, in calculating penalty periods, the VA will disregard asset transfers made before October 18, 2018.

The length of the penalty period is calculated by dividing the value of the transferred asset by the monthly pension rate for a veteran in need of aid and attendance with one dependent that is in effect as of the date of the pension claim, currently $2,169.00. The result is the number of months during which VA will not pay pension benefits. The penalty period begins on the first day of the month that follows the last asset transfer. Only the portion of assets that would make the net worth exceed $123,600 are subject to penalty.