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On January 23, 2015, in an attempt to “maintain the integrity of the program,” the VA proposed sweeping changes to its regulations regarding net worth and asset transfers. While some of the proposed changes may be favorable to a claimant by providing some clarity and consistency, many of them may significantly impact a veteran’s eligibility for benefits and the timeline in which they will be received.

The Good: Establishing a Bright Line Net Worth Limit

Currently, the VA does not have a clearly established net worth limit. While the VA takes into account such factors as liquidity of assets, number of dependents, and life expectancy of the claimant, there are no definitive criteria for determining whether a claimant’s resources are sufficient to meet their basic needs without the pension. However, it has been our experience that only those applicants with a net worth below $80,000 (the lower, the better!) are seriously considered.


The proposed rule change seeks to establish a clear net worth limit, which will allow less discretion on the part of the adjudicators and provide more consistency in the decision making process. The proposed net worth limit would be the same as the maximum community spouse resource allowance used for Medicaid purposes. This amount is currently $119,200, and the limit would be increased at the same time and in the same manner as recipients of Social Security receive for cost-of-living adjustments. 

The Bad: Inclusion of Annual Income in Net Worth; Primary Residence Lot Size Limits

It is proposed that an applicant’s annual income would be added to the sum of his or her assets when determining net worth. This means that veterans with higher incomes will be permitted to save a lower amount of assets, and veterans with lower incomes will be permitted to save a larger amount of assets.

Additionally, a claimant’s primary residence, including a “reasonable lot area” is currently excluded as an asset for purposes of calculating net worth. The proposed rule change seeks to define “reasonable lot” by limiting the area to 2 acres, unless the additional acreage is not marketable. If the primary residence is sold, the VA will not include the proceeds from the sale as an asset if they are used to purchase another primary residence within the same calendar year. However, to the extent the purchase of the new residence is less than the sale price of the previous primary residence, the excess amount will be considered an asset for purposes of net worth calculations.

The Ugly: Asset Transfers and Penalty Periods

Currently, veterans are permitted to transfer significant assets without penalty prior to applying for a pension. The proposed look-back period of 36 months is not new. It was introduced in Congress on two prior occasions between 2012 and 2014 and neither bill passed. This time is different because the VA is acting on its own with the proposed regulations. In the current proposal, all transfers for less than fair market value made during the 36 month look-back period are presumed to be for the purpose of decreasing net worth, unless the applicant can prove by clear and convincing evidence that the transfers were made for some reason other than to qualify for the pension benefit.

The proposed transfer penalty applies only to “covered assets” - assets that were part of the claimant’s net worth, were transferred for less than fair market value, and would have caused the claimant’s net worth to exceed the limit for pension eligibility had they not been transferred. For example, if the net worth limit is $120,000 and a veteran’s net worth is $110,000 on the date his claim is submitted, but the week before he gifted $30,000 to his children, under the proposed rule change the penalty would be assessed on only $20,000 of the transfer. In other words, the transfer penalty will be calculated using only that portion of the amount transferred which was necessary to reduce the claimant’s net worth below the maximum limit.

The penalty period for transfers would be calculated in months by dividing the “covered asset” amount by 1/12 of the applicable maximum annual pension rate. For veterans and surviving spouses, the maximum annual pension rate at the aid and attendance level would be used, regardless of whether the veteran or surviving spouse would qualify for the pension at that level. The VA has noted the use of the higher divisor will shorten the penalty period, but under this proposed calculation system, married veterans would incur significantly lower penalties than single veterans or surviving widows on the transfer of the same amount of assets.

The VA has proposed a maximum penalty period of 10 years (TEN YEARS!) for transfers, opting to deviate from the 36 month maximum consistent with the SSI statute. The VA favored the longer maximum penalty period, indicating it would be inequitable for a claimant who transferred $25,000 to be penalized the same length of time as a claimant who transferred $1,000,000.

If you or someone you love is a veteran and these proposed changes sound scary, they should! It is never too early to think about your future needs and, in light of these proposed changes, a delay in planning could result in considerable consequences regarding both eligibility for benefits and the time in which they are received. Please contact us to schedule your free initial consultation to discuss how we may assist you with protecting your assets and applying for these very important benefits.

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