Last week, July 16, 2010, I wrote about some of the tests that must be met to qualify for a Veterans Administration “non-service connected pension” benefit that can help provide added funds to pay for care in your home or in a facility. These tests included 90 days of military service, one day of service during war time, having the right discharge papers, and having reoccurring monthly medical expenses that were more or somewhat less than your monthly income.
An important additional test to qualify for the VA benefit is the asset test. The Veteran (and their spouse) is allowed a number of assets that are not counted by the Veterans Administration. These include:
- One house
- One car
- “Stuff” in the house.
The instructions for VA Form 21-526 define net worth as follows:
Net worth is the market value of all interest and rights in any kind of property, after subtracting any mortgages and other claims against the property. List all assets except the house in which you live, any reasonable area of land on which it sits, and those items you use everyday, such as your vehicle, clothing and furniture.
Clearly indicate if you and your spouse jointly share assets (such as money in a joint checking account). Report the value of farms or buildings that you or a dependent owns as “real property.”
You must disclose all financial transactions that involve a transfer of assets, even if the transaction occurred prior to the date of your application for VA pension. A gift of property or a sale below the property’s value to a relative residing in the same household does not reduce net worth. Likewise, a gift of property to someone other than a relative residing in your household does not reduce any net worth unless it is clear that you have relinquished all rights of ownership, including the right to control the property .
The “other assets” become the area of focus. Other assets include a second home, rental, cabin, bare lot, other cars, bank accounts, certificates of deposit, stocks, bonds brokerage accounts, Individual Retirement Account (IRAs), 401(k), other retirement accounts, cash value of life insurance, annuities, partnerships, and the list goes on.
The old rule used to be if the “other assets” were less than $80,000 they would be ignored, and the claimant (and their spouse, if any) could keep up to $80,000. That rule has changed. Now the total amount of the “other assets” that you can keep is dependent on the claimant’s life expectancy. If the “other assets” are over $50,000, it may be best to consult with a VA Accredited Attorney, VA Accredited Agent or the Idaho Veterans Service Office.
The value of the other assets is based on the current fair market value of the assets owned by the claimant (and their spouse). If an asset is owned by someone in addition to the claimant (and their spouse), then the value of the asset is considered proportional to the number of owners. For example if you have a single claimant, and a few years ago he put his three children’s names on his Certificate of Deposit valued at $100,000, the VA would treat his interest in the Certificate of Deposit as $25,000.
Unlike the Medicaid rule, the VA rules do not penalize a claimant if they have given assets away in the years before applying for the VA benefits. So, if a grandparent has helped a grandson by paying $10,000 for his school expenses and then the Veteran grandparent goes into an assisted living facility, there is no penalty for the gift. Under the new VA Form 21-526, it is necessary to disclose each gift, but there is no penalty imposed.
Watch out for irrevocable trusts. If the creator of the trust retains any “strings” of control, it is likely the VA will pull the asset back and treat it as if it belongs to the Veteran or the Veteran’s spouse.
What is a “string” of control? Examples include: Substitute assets, change trustees, change trust protector, change beneficiary, or income from the trust is distributed to the creator of the trust and a 1099 is issued in that person’s name.
Being able to receive the Veterans non-service connected pension is a great help to many so they can stay in their home or afford to pay for an assisted living facility.
One last great feature of the VA pension – there is no “Estate Recovery.” The VA is not a “loan” program. The VA does not want to be paid back after the death of the claimant.