There is a special monthly pension available to wartime Veterans who have limited income and resources. The amount of the monthly benefit is dependent upon each Veteran’s individual circumstances. If the Veteran qualifies for the monthly pension, he or she may also be eligible to receive the Aid and Attendance or Housebound benefits. The Aid and Attendance and Housebound benefits are paid in addition to the monthly pension. However, a Veteran cannot receive both Aid and Attendance and Housebound benefits at the same time. There is also a death pension available to a Veteran’s spouse who has not remarried. The maximum pension amounts for 2019 are as follows:
2019 Pension Benefit Figures Maximum Monthly Pension Amount:
Veteran with dependent spouse $1,477.00
Veteran permanently housebound $1,378.00
Veteran permanently housebound with dependent spouse $1,727.00
Veteran needing regular aid and attendance $1,881.00
Veteran needing regular aid and attendance with dependent spouse $2,230.00
Widow of Veteran $756.00
Widow of Veteran permanently housebound $924.00
Widow of Veteran needing regular aid and attendance $1,209.00
Certain requirements must be met in order to qualify for the pension benefit.
1. The Veteran’s discharge from the service must have been honorable.
2. The Veteran must have served at least 90 days of active military service, and one of those days must have been during a wartime period. (There are some exceptions to this rule.)
3. The Veteran is age 65 or older or has a permanent and total disability. (A service-connected disability is not a requirement.)
The income of the Veteran and that of his or her spouse is considered in determining eligibility; however, if combined income exceeds the maximum pension amount, the Veteran and his or her spouse may still be eligible. Income can be reduced by the Veteran’s and his or her spouse’s unreimbursed medical expenses. A Veteran with even a significant amount of monthly income may qualify for a pension. For example, if the Veteran has $3,000 in monthly income, he would not be eligible for a pension; however, if he is in a nursing facility and pays $8,000 a month for his care or if he is in an assisted living facility and pays $3,500 a month, his IVAP (income for Veterans Administration purposes) has been reduced to $0 ($3,000 minus $8,000 or $3,000 minus $3,500) so he would qualify for the maximum pension amount.
Additionally, there are some resource limits. The Veterans Administration considers a Veteran’s net worth in determining eligibility. Generally, a Veteran’s home, car, personal property, and some other assets are not considered in determining net worth. Net worth includes assets such as bank accounts, stocks, bonds, mutual funds, and other assets.
There are ways to reduce net worth for purposes of qualifying for benefits; however, this reduction of assets must be done before an application for a pension is filed. The Veteran may be able to give away or transfer assets in order to reduce his or her net worth. The Veterans Administration does not have the same “look-back” period as does the Medicaid program. However, the Veteran and his or her family should consult an experienced elder law attorney before giving away assets because giving away assets could make the Veteran (and his or her spouse) ineligible for other government programs such as Medicaid.
Veterans benefits can provide significant help in paying for long-term care expenses. Steinbacher, Goodall & Yurchak can help you determine if you qualify for a Veterans pension and develop a comprehensive estate and long-term care plan that meets your individual needs and goals. To schedule your FREE consultation, contact Steinbacher, Goodall & Yurchak at (570) 322-2077.
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. On September 18, 2018 the proposed rule was adopted as final and it will become effective on October 18, 2018. While some of the 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.
Establishing a Bright-Line Net Worth Limit
Previously, the VA did 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 were no definitive criteria for determining whether a claimant’s resources are sufficient to meet their basic needs without the pension.
The new rule establishes 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 net worth limit is the same as the maximum annual community spouse resource allowance used for Medicaid purposes. This amount is currently $127,061 (effective 12/1/2018) 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.
Inclusion of Annual Gross Income in Net Worth
An applicant’s annual income will 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.
Exempt Assets: Primary Residence & Lot Size Limits
Additionally, a claimant’s primary residence, including a “reasonable lot area” is currently excluded as an asset for purposes of calculating net worth. The rule change defines “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.
36 Month Look-Back Period on Asset Transfers and Penalty Periods
Previously, veterans were permitted to transfer significant assets without penalty prior to applying for a pension. However, the new rule establishes a 36 month look-back period. 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 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.
The penalty period for transfers is calculated in months by dividing the transfer amount by a set divisor of $2,230. For example, if an applicant transfers $80,000.00, his or her penalty period would be 35.87 months, which would be rounded down to 35 months.
The VA has proposed a maximum penalty period of 8 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.
Expenses that can help decrease assets include medical expenses, which are medically necessary, improve a disabled individual’s functioning, or that prevent, slow, or ease and individual’s functional decline; over-the-counter drugs, vitamins, supplements (prescribed by a medical professional), and incontinence supplies; service animals with vet care; mileage to and from the doctor’s office or hospital; and dental, eye, and hearing care.
Additionally, the new regulations allow the costs of a care facility, other than a nursing home, to be deducted. A care facility other than a nursing home is a facility in which a disabled individual receives health care or custodial care. The new regulations define custodial care as regular assistance with two or more activities of daily living (ADLs) or supervision because an individual with a physical, mental, developmental, or cognitive disorder requires care or assistance on a regular basis to protect the individual from hazards or dangers incident to his or her daily environment. Furthermore, the new regulations put no hourly cap on caregivers’ service fees.
These facility costs can be fully deducted if a physician certifies the need for the individual to live in a “protective environment” and states the physical, mental, cognitive, or developmental reason for such protection. However, a residential facility must be staffed with care providers 24 hours per day.
In 2014, the Achieving a Better Life Experience Act (ABLE Act) opened a door at the federal level to give each state the opportunity to set up programs for people with disabilities and their families to establish tax-advantaged savings accounts without impacting the disabled individual’s public benefits.
On April 18, 2016, Governor Wolf signed the Pennsylvania Achieving a Better Life Experience Act (PA ABLE Act). The PA ABLE Act was passed to provide more financial options and security to individuals whom became disabled prior to age 26. This is to be accomplished through savings accounts established for benefit of the disabled individual in which funds may accumulate tax-free to pay for qualified disability expenses without jeopardizing their eligibility for need-based programs such as Supplemental Security Income (SSI) and Medicaid.
If an individual becomes disabled prior to the age of 26 and is already receiving SSI and/or Social Security Disability Insurance (SSDI), the individual is automatically eligible to establish an ABLE account. However, if the individual is not currently receiving these benefits, they must first obtain a physician certification to set up an account.
These accounts have many tax advantages. They are able to grow tax-free and are exempt from Pennsylvania inheritance tax. Withdrawals are exempt from federal and state income tax when used for qualified disability expenses such as community living expenses such as education, housing, transportation, employment training and support, assistive technology, housing, personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and more.
Typically, the beneficiary of the account is named as the owner, but anyone may contribute. The combined yearly contributions may not exceed $15,000, which will be adjusted annually for inflation. The total account contributions over the life of the beneficiary cannot exceed the limit for Pennsylvania education-related 529 plans. In 2018, this amount was $511,758.
ABLE accounts do not need to be established by the beneficiary. If parent, guardian, or power of attorney opens an ABLE account on behalf of a minor or adult lacking capacity, they are held as the fiduciary and will remain in that role until they decide to relinquish control of the account.
Likewise, ABLE accounts need not be managed by the beneficiary. In Pennsylvania, any person designated in writing by the parent or guardian, a trustee of a trust for which the eligible individual is a beneficiary, if the eligible individual is receiving SSI or SSDI, the representative payee, or anyone else allowed by federal law, which includes parents, guardians, and powers of attorney can have “signatory authority.”
Prior to the ABLE Act, individuals with more than $2,000 were deemed ineligible for SSI and other means-tested programs. It is now possible for disabled individuals to hold assets that exceed this individual resource limit in an ABLE account and still qualify for public benefits as long as the account total does not hold more than $100,000. If the ABLE account accumulates more than $100,000, the disabled individual’s SSI benefits may be suspended. After the account balance is drawn back to $100,000 or less, their benefits will be reinstated. On the other hand, Medicaid is not impacted by this fluctuation.
ABLE accounts are now available in Pennsylvania. To open a Pennsylvania ABLE account, it is expected that you will go through the Pennsylvania Treasury Department and enroll online or through mail. You visit http://www.paable.gov/index.html to read details of the ABLE program in Pennsylvania, or to enroll in an ABLE account.
If you are a Pennsylvania resident looking to open an ABLE account, it is permissible to do so in another state. However, other state plan contributions are not state-tax deductible.