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End of Life Planning Conference @ FBC Lawndale with The Elder Law Guy

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Greg McIntyre, The Elder Law Guy, speaks to a great crowd about saving hard earned money and property.

How to Preserve Your Legacy With Legacy Videos

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Legacy-Videos-page-300x198Jennifer Childress and I have just finished having a conversation, and I wanted to talk about it here. We were discussing legacy videos, which is something that Jennifer and her staff are going to help us provide as a new service to our clients with McIntyre Elder Law.

So what’s a legacy video? A legacy video is your story brought to life. It can be anything from words of wisdom to tales about your childhood – anything you want your loved ones and family to remember about you.

 

The Priceless Benefits of Legacy Videos

Have you ever seen the movie Brewster’s Millions? That’s what I always think of when legacy videos come up. The scene where they go to the attorney’s wood panel office, and he plays the great-uncle’s video explaining how he’d like to dispose of his assets.

Now, that was a funny movie, but think about how powerful it is to have a traditional, old-fashioned will reading. It could even be at the house, just sitting around in the den. You put on a DVD where mom, dad, grandma, or granpdpa are actually telling the family, “I love you guys. This is how I want to dispose of my property, my assets, and this is why I’ve done it this way”.

We live in a digital age now, so that video could also be on a USB drive or even stored in the cloud. It could be e-mailed around, with links sent to loved ones anywhere and to view at any time.

It doesn’t have to be limited to just wills and assets either. It’s a chance to pass a little knowledge or heritage on to the next generation. Just think about how much wisdom you will have once you’ve lived a full lifetime.

If you lived through something like WWII, the Civil Rights Movement, or the JFK assassination, what was your experience? You can impart your memories and history to your children, your grandchildren, and beyond.

legacy_largeYour morality, your wisdom, and how to act in certain situations and why. Things that they could look back upon and remember the way things were or the way things should be. It’s very powerful in a lot of ways.

Our personal history is history. It’s the story of us. How did we get from then to now? How did we get from a little colony of troublemakers to one of the most powerful nations on the planet?

You can’t grow if you don’t know where you’ve come from, even if it’s just a small, little thing – something seemingly insignificant.

There’s a saying that you’ve probably heard, which goes something like “Those who don’t pay attention to history are doomed to repeat it”. That’s what we want to prevent against, and to allow those experiences to go forward and not just be lost. That’s what a legacy video could do.

 

The Simple Process of Creating a Legacy

So how would we make a legacy video for one of our clients? Jennifer would meet with you either in your home or here in our office. They’ll set up a little equipment and you’ll have a talk.

Just an old fashioned tea party to get comfortable with each other. Jennifer will ask you about yourself. She’ll give you the chance to open up and tell your story, to her and the camera. They can learn about your experiences and see how things have changed and progressed since your time.

Maybe you tell them about your career and the importance of hard work. Maybe you came from nothing, a real underdog, and overcame it all to become a great success. This is your chance to tell that story to your children and grandchildren.

We’ll show you the video first, and it can be edited any way you see fit. Maybe you don’t want the kids to know everything – that’s what editing is about. We’ll just clip it out. It’s that easy.

Once you’ve got that video, it will be something that be passed on to the entire family.

 

Send Us Your Questions

We’re very excited to be working with Jennifer Childress to produce these legacy videos for you, our clients, to go along with your plans to protect your assets and legacies. It will be an awesome addition.

If you have any questions about our legacy videos, we’d be glad to talk with you about them.

Interview with WWII Veteran, JC Horne, my grandfather

in Elder Law TV by Greg McIntyre 1 Comment

Interview piece conducting with WWII Veteran, JC Horne, my grandfather. JC was a machine gunner in the European conflict. Great descriptive piece about the war and his role in it.

Special Edition: World War II Veteran’s Interview and Veteran’s Benefits

in Elder Law TV by Greg McIntyre 1 Comment

Elder Law Report Special Presentation in honor of V-E Day. I am so proud to be bringing you an interview with my grandfather and WWII Veteran, JC Horne. Enjoy the interview and call me with questions: 704-259-7040.

http://www.mcelderlaw.com

Creating Legacy Videos

in Elder Law TV by Greg McIntyre Leave a comment

I am so proud to sit down with Jennifer Childers, co-owner of Felis Minor Productions to discuss “Legacy Videos”. A legacy video can be a great memento to pass down to future generations and preserve your families long-held traditions and let the younger generation never forget the knowledge you have to pass down to them. A legacy video can be a great companion to a will and estate plan to be played for the family at the will reading and beyond. Contact our office if you would like to get started on your legacy video today! 704-259-7040.

A Lesson in Pre-Planning from my Grandmother

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Missing my grandmother today. She just passed away this past Monday. It made me think about how we can avoid crisis situations.

My grandmother lived into her mid-80s and passed away peacefully, with her sister holding her hand. She had not been sick very long, and luckily did not suffer.

I was very close to her. I remember spending pretty much the whole summer over there, always around her and my grandfather, before he passed.

She was a sharp lady, who worked her whole life and saved money. They owned their own house, which was paid for. Always had a smile on their face and a kind word to say about everyone. They just had a very productive life.

Not only did my grandmother plan ahead with saving, she planned ahead to protect what she saved. She had deed work done maybe ten years ago to protect her home. To make sure that no matter what happened it wasn’t going to have to be sold to satisfy some medical debt or to pay for nursing home, in-home, or assisted living care.

My mother, along with her brother and sister, had a medical and general durable power of attorney in place, so that they could handle and manage her affairs toward the end of her life or in-between healthcare incidents. She had a few others as well, like open heart surgery about 8 years ago and other times where she just has not been able to manage everything.

Having those power of attorneys in place meant the kids could step in and manage those things for her. Trusted individuals could handle her affairs and make sure the band played on, if you will, while she recovered. It made sure nobody dropped the ball paying bills and the doctors didn’t have to wonder who to look to for healthcare matters.

In addition, most of her liquid assets were set up in either joint accounts, with rights to survivorship, or transferable upon death assets that had beneficiaries. So at the end of her life, probating an estate really isn’t much of an issue at all.

So to avoid a crisis situation, where the healthcare incident hits and you say, “Wow, what now? We’re going to lose the house or all the liquid assets”, it’s important to organize things ahead of time. It’s important to get those affiars in-shape.

See an estate planning or elder law attorney who focuses in that field or area. Make sure you pre-plan and have everything the way you need it.

Veteran’s Aid and Attendance Benefits – Little know program with a huge benefit…

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Wartime veterans and their surviving spouses, 65 years and older, may be entitled to a tax-free benefit called Aid and Attendance provided by the Department of Veteran Affairs.

The Benefit is designed to provide financial aid to help offset the cost of long-term care for those who need assistance with the daily activities of living such as bathing, dressing, eating, toileting, and transferring.

I served in the military during a wartime conflict and if you did too you could be eligible for a little known benefit called Aid and Attendance.  This benefit can award up to $2,837 for the veteran or $1,149 for the spouse of a veteran.  This video explains:

ELIGIBILITY FOR THE AID & ATTENDANCE PENSION

Any War-Time Veteran with 90 days of active duty, 1 day beginning or ending during a period of War, is eligible to apply for the Aid & Attendance Improved Pension. A surviving spouse (marriage must have ended due to death of veteran) of a War-Time Veteran may also apply. The individual applying must qualify both medically and financially. To see the periods of war that have been qualified by Congress, Click Here.

To qualify medically, a War-Time Veteran or surviving spouse must need the assistance of another person to perform daily tasks, such as eating, dressing, undressing, taking care of the needs of nature, etc. Being blind or in a nursing home for mental or physical incapacity, or residing in an assisted living facility also qualifies.

Eligibility must be proven by filing the proper Veterans Application for Pension or Compensation. This application will require a copy of DD-214 (see below for more information) or separation papers, Medical Evaluation from a physician, current medical issues, net worth limitations, and net income, along with out-of-pocket Medical Expenses.

To qualify financially, an applicant must have on average less than $80,000 in assets, EXCLUDING their home and vehicles.

 

Benefit Table

Status

Monthly Benefit Amount

Surviving Spouse $1,149
Single Veteran $1,788
Married Veteran $2,120
Two Vets Married $2,837

We at McIntyre Elder Law handle planning for veterans including applications for VA Aid and Attendance and Veterans Asset Protection Trusts.  Contact our office to learn more.

Avoiding a Crises Situation

in Elder Law TV by Greg McIntyre Leave a comment

Elder Law Attorney, Greg McIntyre, takes a personal look back at a personal loss and how a loved one avoided a crises planning situation. Learn tips to avoid a crises situation.

How Are You Going To Pay For Your Healthcare?

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According to a 2005 US Department of Heath and Human Services study, 70% of people over the age of 65 are going to need some type of long-term healthcare during their life, whether in-home, assisted living, or skilled nursing care, which is nursing home care.

And has anybody ever looked up the life expectancy of a family care giver?

Many times family care givers actually pre-decease the people that they’re caring for. The reason for that is because of the stress.

For me, I’ve got a beautiful wife, Stephanie, and six children I’ve got to deal with and take care of. If I tried to take care of my mother and father on top of that or Stephanie tried to, I couldn’t imagine the amount of stress that would put on me. Plus, I’m not an expert at it.

So you want to get an expert that can come in and help you out. Whether it’s the bathing or running the errands or really detailed things like ventilators.

 

How You Can Pay For Long-Term Care

The question is, how will the healthcare be paid for if you wind up in that situation?

These are some of the average national rates:

– Nursing home: about $76,000

– Assisted living: about $40,000 a year

– Home healthcare agent: about $21 an hour

You want a plan so you have options, so you can have someone like a Bayada Home Healthcare come in and take care of you in the home. So you’re not just sent to a Medicaid facility or left with just a Medicaid bed.

Two choices are paying with your own savings or purchasing long-term care insurance.

Traditional long-term care insurance has experienced a major overhaul in the last couple of years. It’s better.

There’s also life insurance with long-term care riders. There are long-term care annuities where you can put, for instance, $100,000 in annuity set up to pay for long-term care. And it’s going to pay off up to 4 times as much or more than that. That’s $400,000 in care or higher, using that example. 

And if it did spend down and you had to roll onto Medicaid to pay for care, it would save the $100,000 through a state partnership that’s in place. They couldn’t touch it.

There’s a lot of different products these days. That’s why I always say, elder law and everything I work with is really a cutting edge area of the law and finance and home care. Because these things are just going to become more and more available.

More products, more legal tools to help people as the baby boomer population ages and as we have more and more of a need for them.

 

Medicaid and Veteran’s Administration Benefits

Medicaid and the VA also provide programs that can help pay for home care.

With Medicaid, there is a waiver program for personal services here in North Carolina which can be set up by your physician. Now, your physician may not already be aware of the program, but someone like Bayada Home Health Care can provide you with those forms and help you get started.

That program usually provides between 80 and 120 hours of care per month spread out over five days per week.

Care Solutions, here in Cleveland County, also runs a CAP/DA program for those that are Medicaid and nursing home eligible, which can provide about 30 to 36 hours per week of care.

With the Veteran’s Administration, veterans who were active duty during war time are eligible for home and attendant care services. That veteran only had to be in the military for one day during a time when the US was at war, they didn’t have to actually be there.

So that can definitely be a great option if you’re a veteran.

 

Understanding Your Insurance: Home Care vs. Home Health

When looking at your insurance policy, it’s important to understand the differences between home health and home care.

The continuous care we’ve covered here is considered home care. This can include anywhere from one hour to 24 hours of care per day, up to 7 days per week.

That is not the same thing as what Medicare and most traditional insurance policies provide. They cover home health, which only includes a few hours of care per week for a set period of time, usually about 60 days.

So it’s important to understand exactly what your insurance covers and does not cover beforehand.

 

Keeping Your Savings Safe When Paying For Health Care

The goal of my practice is to help people age with dignity.

Buying my first home was a really big deal. I was so proud of it.

But some people save and pay 30 to 40 years on a mortgage, and then, at the end, see that stripped away, see all their retirement savings lost. Sometimes a couple will a have a sick spouse who is taking all the benefits that they both saved to retire on.

It’s hard enough to save to retire and live the same or a similar standard of living as when you’re working. But if you have to take on a payment of nursing home care, assisted living, or in-home care on top of that, it can be crushing, in that you can see a large estate or amount of money go away rather quickly.

It can be a blow to our dignity. I call it the “hang your head spend down”. The family goes and spends all the money and turns everything over.

But there’s some things that we can do to plan for it, so you have choices going in.

We want to access the best care possible so you can get options. Take control over who manages your finances and under what circumstances. I’m talking about powers of attorney and general durable powers of attorney.

I routinely recommend that you get long-term care insurance. That’s part of the assessment. If I see that you don’t have it, I’m going to tell you where your weaknesses are – and that’s such a weakness.

It’s so nice to meet with somebody who already has long-term care insurance, especially if it’s an adequate policy. Because they’re just so well-protected.

They’re insured. If something bad happens, they’re going to have that option.

You meet those requirements, and it kicks in and pays the bills. To have someone set up that way ahead of time and pre-planned would be ideal.

We want to avoid running out of money. Leaving your home, which is often the most valuable asset, unprotected.

We want to avoid risking the health of family or spousal caregivers. A novice who’s not trained to do it, but who’s trying to do it. Who’s trying to get it done.

Maybe you don’t think you can afford in-home care, but there’s a number of ways to do it.

We can also implement a legal plan to save your home, your savings, or a combination of the two. I would recommend a combination approach and evaluating your goals. We do that for people all the time, whether in an emergency healthcare situation or planning ahead.

Take control of your future. Age with dignity. Chances are you’ll need healthcare down the road, so let’s figure out your options today. 

Proposed Changes to the VA Pension Eligibility Rules

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Elder Law Newsletter - Header

Introduction

On January 23, 2015, the Department of Veteran Affairs (hereinafter “VA”) issued proposed changes to

the regulations affecting VA Pension eligibility, a needs-based program.[1]  In support of the proposed changes to the regulations, the VA points to the results of a 2012 Government Accountability Offices (GAO) report.[2]  That report recommended changes in order to “maintain the integrity of VA’s needs-based benefit programs.” 

The proposed changes come on the heels of two bills:  H.R. 2189 proposed by the House of Representatives; and S.944 proposed by the Senate.  Both bills were proposed in 2013 and no action has occurred with regard to them since late that same year.  The VA’s proposed changes are strikingly similar to the two proposed bills, which Congress failed to pass. 

In this issue of the ElderCounselor™ we will review the proposed regulatory changes and discuss how they might affect wartime Veterans over the age of 65 and surviving spouses of wartime Veterans.  

How the Law Currently Reads

VA Pension benefits are a major focus of the proposed changes.  These benefits are available to wartime Veterans (and their surviving spouses) who meet certain criteria.  Prior to September 1980, the Veteran must have served at least ninety (90) days of active duty with at least one day being during a wartime period (as set by Congress).  After 1980, the Veteran must have generally served at least twenty-four (24) months of active duty with at least one day being during a wartime period.   The Veteran must not have been dishonorably discharged. 

There is a disability requirement for the VA Pension benefit, which is satisfied if the Veteran is sixty-five (65) years of age or older, or permanently and totally disabled.  If the Veteran or surviving spouse has additional medical needs then additional allowances may be awarded, like an aid and attendance allowance.

An applicant for VA Pension must also meet certain financial requirements. The current law reads that an applicant’s net worth must not be excessive, taking into consideration the applicant’s age, income and expenses, life expectancy, and rate of depletion of the applicant’s net worth .  The financial rules also require that household income must be less than the benefit the applicant is seeking; however, income may be reduced by out-of-pocket medical expenses. 

Proposed Changes

Net Worth

The proposed changes include a bright-line limit on “net worth” that an applicant is allowed to have when qualifying for VA Pension.  The limit is the same as the maximum community spouse resource allowance (CSRA) for Medicaid purposes (currently $119,220).  This amount would increase annually at the same rate as the cost-of-living increase for Social Security benefits.  Income is also counted toward the net worth limit under the proposed rules. 

Treatment of Income

The proposed rules would include income in the applicant’s net worth calculation.  In other words, if a Veteran has assets worth $117,000 and receives an income of $2,000 per month, the Veteran’s “net worth” is calculated at $117,000 + $24,000, which is well over the “net worth” limit allowed.

Determining Asset Amount

The proposed regulations define assets as, “fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.  VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset.”

Asset Exclusions

A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations.  However, the proposed rules cap the “reasonable lot area” that the home sits on at 2 acres, a limit that does not exist under current law.

Transfer of Assets and Penalty Periods

The proposed regulations include the addition of penalty periods for assets that an individual transfers prior to applying for VA Pension.  Any “covered assets” (one that is used in calculating “net worth”) that are transferred will be subject to a penalty period. The penalty provisions are not limited to actual gifts, but also apply to the purchase of an annuity or a transfer to a trust (revocable or irrevocable).

The actual penalty period (the time period that the claimant will remain ineligible for the Pension benefit due to the transfer) may not be longer than ten (10) years.  The penalty period will be calculated by using the amount of the transfer over and above the “net worth” limit and dividing it by the maximum annual Pension rate.  This penalty period begins to run the month after the last transfer was made.

To illustrate:  A married Veteran applies for VA Pension with an aid and attendance allowance.  The monthly benefit she is trying to qualify for is $2,120.  During the past 3 years, the Veteran contributed $10,000 to The Wounded Warriors Project, a nonprofit organization.  She also gave her only child $1,000 on each birthday the past 3 years.

As a result of the charitable contribution and the cash gifts to her child ($13,000 total in 3 years), this Veteran will be penalized for 6.13 months when she applies for VA Pension.  If this same Veteran was not married, the penalty would be 11.3 months.

Lookback Period

The lookback period for all transfers, is thirty-six (36) months immediately preceding the date of application for the VA Pension benefit?  There is a presumption that any transfer made during this thirty-six (36) month period of time was made for the purpose of qualifying for the VA Pension benefit.  As an exception to this presumption, the claimant must prove by clear and convincing evidence that the transfer was the result of fraud, misrepresentation or other bad act in the marketing or sale of a financial product.  Otherwise, the presumption is non-rebuttable.

In the example above, the Veteran, whose transfers had nothing to do with VA Pension eligibility, would not be able to rebut this presumption and would have to take the penalty imposed.

Medical Expense Deductions from Income

Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning.  These medical expenses are deducted from income.  This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the proposed rules seek to limit the circumstances under which room and board expenses may be counted, as well as the amount paid.  There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application.

The proposed rules also limit the hourly amount that can be paid to a home health care provider.  The amount is based on a national average, rather than local costs for care. 

Burden on Surviving Spouses

The surviving spouse of a wartime Veteran can make a claim for the Pension benefit if the Veteran meets the service criteria and the spouse meets the financial requirements.  However, the proposed rules put the surviving spouses at a disadvantage.  The proposed regulations allow surviving spouses little flexibility in planning due to the calculation method of the penalty period.  Where a married Veteran applying for VA Pension with an aid and attendance allowance could transfer $10,000 and incur a penalty period of 4.7 months, a surviving spouse transferring the same amount would incur a penalty period of 8.7 months.  As illustrated earlier, the gifting that many people do to benefit their children on birthdays, holidays or other reasons, charitable contributions or donations to places of worship will create a penalty period under these rules.

Negative Effects of the Proposed Regulations

Below are just a few of the potential negative effects of the proposed regulations if they pass as currently written.  We would be happy to speak to you further about additional harmful effects of the rules as written.

1. As mentioned above, surviving spouses will be penalized more harshly than Veterans for making transfers prior to applying for VA Pension – even if those transfers had nothing to do with qualifying for VA Pension.

2. Applicants in rural areas will be treated unfairly by the 2-acre limit on the reasonable lot area.  Currently, an applicant’s home and reasonable lot area that is immediately adjacent to the home is not counted for net worth purposes. 

3. Transfers made prior to an application for VA Pension will be penalized regardless of the reason for the transfer.  Therefore, a cash birthday gift to a child, a contribution to a charity, or a donation to a place of worship will all be penalized if the Veteran or surviving spouse later applies for VA Pension.

4. Basic estate planning, like establishing and funding a revocable living trust, will be subject to a penalty if that same individual applies for VA Pension within 3 years. 

Status of the Proposed Rule Changes and a Call to Action

The regulations proposed by the VA are currently up for public comment until March 24, 2015.  Until that deadline, the public is free to comment and the VA is required to respond to those comments before passing the regulations.  If you would like to comment on the proposed rules, please include this information in your response:  Subject: RIN 2900-AO73, Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits.  You can read the full text of the bill, a summary of the bill and you can post your comments online (see the blue “Comment Now” text in the top right corner) using this link: http://www.regulations.gov/#!documentDetail;D=VA-2015-VBA-0003-0001.

You may also consider reaching out to your local representatives in Congress to let them know about some of the negative effects of the proposed changes. 

If you would like more information or would like to discuss the impact of these changes on wartime Veterans and surviving spouses in more detail, please feel free to contact our office.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

 



[1] The proposed change would amend 38 CFR Part 3, which covers net worth, asset transfers and income exclusions for needs-based benefits.

[2] The 2012 GAO report is one prepared for Congress.  http://www.gao.gov/products/GAO-12-342SP

Proposed Changes to the VA Pension Eligibility Rules

 

Introduction

On January 23, 2015, the Department of Veteran Affairs (hereinafter “VA”) issued proposed changes to

the regulations affecting VA Pension eligibility, a needs-based program.[1]  In support of the proposed changes to the regulations, the VA points to the results of a 2012 Government Accountability Offices (GAO) report.[2]  That report recommended changes in order to “maintain the integrity of VA’s needs-based benefit programs.” 

The proposed changes come on the heels of two bills:  H.R. 2189 proposed by the House of Representatives; and S.944 proposed by the Senate.  Both bills were proposed in 2013 and no action has occurred with regard to them since late that same year.  The VA’s proposed changes are strikingly similar to the two proposed bills, which Congress failed to pass. 

In this issue of the ElderCounselor™ we will review the proposed regulatory changes and discuss how they might affect wartime Veterans over the age of 65 and surviving spouses of wartime Veterans.  

How the Law Currently Reads

VA Pension benefits are a major focus of the proposed changes.  These benefits are available to wartime Veterans (and their surviving spouses) who meet certain criteria.  Prior to September 1980, the Veteran must have served at least ninety (90) days of active duty with at least one day being during a wartime period (as set by Congress).  After 1980, the Veteran must have generally served at least twenty-four (24) months of active duty with at least one day being during a wartime period.   The Veteran must not have been dishonorably discharged. 

There is a disability requirement for the VA Pension benefit, which is satisfied if the Veteran is sixty-five (65) years of age or older, or permanently and totally disabled.  If the Veteran or surviving spouse has additional medical needs then additional allowances may be awarded, like an aid and attendance allowance.

An applicant for VA Pension must also meet certain financial requirements. The current law reads that an applicant’s net worth must not be excessive, taking into consideration the applicant’s age, income and expenses, life expectancy, and rate of depletion of the applicant’s net worth .  The financial rules also require that household income must be less than the benefit the applicant is seeking; however, income may be reduced by out-of-pocket medical expenses. 

Proposed Changes

Net Worth

 

The proposed changes include a bright-line limit on “net worth” that an applicant is allowed to have when qualifying for VA Pension.  The limit is the same as the maximum community spouse resource allowance (CSRA) for Medicaid purposes (currently $119,220).  This amount would increase annually at the same rate as the cost-of-living increase for Social Security benefits.  Income is also counted toward the net worth limit under the proposed rules. 

Treatment of Income

The proposed rules would include income in the applicant’s net worth calculation.  In other words, if a Veteran has assets worth $117,000 and receives an income of $2,000 per month, the Veteran’s “net worth” is calculated at $117,000 + $24,000, which is well over the “net worth” limit allowed.

Determining Asset Amount

The proposed regulations define assets as, “fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property.  VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset.”

 

Asset Exclusions

A primary residence, whether or not the claimant resides there, is an excluded asset for calculating “net worth” and will continue to be so under the proposed regulations.  However, the proposed rules cap the “reasonable lot area” that the home sits on at 2 acres, a limit that does not exist under current law.

Transfer of Assets and Penalty Periods

The proposed regulations include the addition of penalty periods for assets that an individual transfers prior to applying for VA Pension.  Any “covered assets” (one that is used in calculating “net worth”) that are transferred will be subject to a penalty period. The penalty provisions are not limited to actual gifts, but also apply to the purchase of an annuity or a transfer to a trust (revocable or irrevocable).

The actual penalty period (the time period that the claimant will remain ineligible for the Pension benefit due to the transfer) may not be longer than ten (10) years.  The penalty period will be calculated by using the amount of the transfer over and above the “net worth” limit and dividing it by the maximum annual Pension rate.  This penalty period begins to run the month after the last transfer was made.

To illustrate:  A married Veteran applies for VA Pension with an aid and attendance allowance.  The monthly benefit she is trying to qualify for is $2,120.  During the past 3 years, the Veteran contributed $10,000 to The Wounded Warriors Project, a nonprofit organization.  She also gave her only child $1,000 on each birthday the past 3 years.

As a result of the charitable contribution and the cash gifts to her child ($13,000 total in 3 years), this Veteran will be penalized for 6.13 months when she applies for VA Pension.  If this same Veteran was not married, the penalty would be 11.3 months.

Lookback Period

The lookback period for all transfers, is thirty-six (36) months immediately preceding the date of application for the VA Pension benefit?  There is a presumption that any transfer made during this thirty-six (36) month period of time was made for the purpose of qualifying for the VA Pension benefit.  As an exception to this presumption, the claimant must prove by clear and convincing evidence that the transfer was the result of fraud, misrepresentation or other bad act in the marketing or sale of a financial product.  Otherwise, the presumption is non-rebuttable.

In the example above, the Veteran, whose transfers had nothing to do with VA Pension eligibility, would not be able to rebut this presumption and would have to take the penalty imposed.

Medical Expense Deductions from Income

 

Medical expenses are those that are either medically necessary or improve a disabled individual’s functioning.  These medical expenses are deducted from income.  This becomes more complicated when the claimant is receiving home care or is in an independent or assisted living facility, as the proposed rules seek to limit the circumstances under which room and board expenses may be counted, as well as the amount paid.  There are very specific rules as to which services qualify as medical expenses and the claimant will have to be able to identify those in his/her application.

The proposed rules also limit the hourly amount that can be paid to a home health care provider.  The amount is based on a national average, rather than local costs for care. 

Burden on Surviving Spouses

The surviving spouse of a wartime Veteran can make a claim for the Pension benefit if the Veteran meets the service criteria and the spouse meets the financial requirements.  However, the proposed rules put the surviving spouses at a disadvantage.  The proposed regulations allow surviving spouses little flexibility in planning due to the calculation method of the penalty period.  Where a married Veteran applying for VA Pension with an aid and attendance allowance could transfer $10,000 and incur a penalty period of 4.7 months, a surviving spouse transferring the same amount would incur a penalty period of 8.7 months.  As illustrated earlier, the gifting that many people do to benefit their children on birthdays, holidays or other reasons, charitable contributions or donations to places of worship will create a penalty period under these rules.

Negative Effects of the Proposed Regulations

 

Below are just a few of the potential negative effects of the proposed regulations if they pass as currently written.  We would be happy to speak to you further about additional harmful effects of the rules as written.

1. As mentioned above, surviving spouses will be penalized more harshly than Veterans for making transfers prior to applying for VA Pension – even if those transfers had nothing to do with qualifying for VA Pension.

2. Applicants in rural areas will be treated unfairly by the 2-acre limit on the reasonable lot area.  Currently, an applicant’s home and reasonable lot area that is immediately adjacent to the home is not counted for net worth purposes. 

3. Transfers made prior to an application for VA Pension will be penalized regardless of the reason for the transfer.  Therefore, a cash birthday gift to a child, a contribution to a charity, or a donation to a place of worship will all be penalized if the Veteran or surviving spouse later applies for VA Pension.

4. Basic estate planning, like establishing and funding a revocable living trust, will be subject to a penalty if that same individual applies for VA Pension within 3 years. 

Status of the Proposed Rule Changes and a Call to Action

 

The regulations proposed by the VA are currently up for public comment until March 24, 2015.  Until that deadline, the public is free to comment and the VA is required to respond to those comments before passing the regulations.  If you would like to comment on the proposed rules, please include this information in your response:  Subject: RIN 2900-AO73, Net Worth, Asset Transfers, and Income Exclusions for Needs-Based Benefits.  You can read the full text of the bill, a summary of the bill and you can post your comments online (see the blue “Comment Now” text in the top right corner) using this link: http://www.regulations.gov/#!documentDetail;D=VA-2015-VBA-0003-0001.

You may also consider reaching out to your local representatives in Congress to let them know about some of the negative effects of the proposed changes. 

If you would like more information or would like to discuss the impact of these changes on wartime Veterans and surviving spouses in more detail, please feel free to contact our office.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.



[1] The proposed change would amend 38 CFR Part 3, which covers net worth, asset transfers and income exclusions for needs-based benefits.

[2] The 2012 GAO report is one prepared for Congress.  http://www.gao.gov/products/GAO-12-342SP

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