The Veteran's Administration (VA) offers a pension benefit to low-income veterans (or their spouses) who are in nursing homes, assisted living or who need help at home with everyday tasks like dressing or bathing. The benefits are substantial, tax free cash payments (over $21,000/year, veteran, over $25,000/year, veteran with a dependent, and over $13,000 veteran’s surviving spouse) to veterans whose income is essentially wiped out by their medical expenses. Pending changes to the regulations for this pension benefit, called Aid and Attendance, will make it available to fewer veterans.

The new regulations will specify maximum asset limits for qualification and impose a look-back period and transfer penalties similar to Medicaid. These restrictions on the benefit did not exist previously. However, the VA, facing criticism from the General Accounting Office, frequently attempted to enforce artificial asset and lookback limitations not vetted through proper legislative and regulatory channels.

Currently, to be eligible for Aid and Attendance a veteran (or the veteran's surviving spouse), in theory, must meet certain income and asset limits. The asset limits, which are not contained in regulations, are thought to be about $80,000 — but the VA has long been known to “age weight” this amount. In other words, the older a person is, the fewer assets the VA would historically permit him or her to own and receive the benefit. However, unlike with the Medicaid program, no penalties were imposed if an applicant divested him- or herself of assets before applying. In other words, the veteran could give all of his or her assets away on day one and apply for the benefits on day two without restriction.

The regulations will at least define the asset level required to meet the VA’s definition of “low income” or “needs based.” The proposed regulations set an asset limit of $119,220, which is the current amount (2016) that a Medicaid applicant's spouse is allowed to retain. But for the Aid and Attendance benefit, the net worth number will include both the applicant's assets and income. It will be indexed to inflation in the same way that Social Security increases. An applicant's house will not count as an asset, but there is a two-acre limit on the lot size that can be excluded.

The regulations also establish a three-year look-back provision, as opposed to Medicaid’s 5-year look-back. Applicants who transfer assets within three years of applying for benefits will be subject to a penalty period that can last as long as 10 years! To avoid the penalty, applicants must present clear and convincing evidence that the transfer was not made in order to qualify for Aid and Attendance benefits.

Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred by the applicable maximum annual pension rate (MAPR). The MAPR for surviving spouses is a little more than half the MAPR for veterans, which means the penalty period for a surviving spouse would be almost twice as long as a veteran's penalty period would be for the same transferred asset.

It isn't clear yet when the new regulations will take effect, and some VA offices are reportedly already processing applications under the new rules, which does not appear to be appropriate. If you are considering applying for Aid and Attendance benefits, you should contact a VA accredited attorney or agent for assistance because the applications involve many traps for the unwary, regardless of whether the new, the old or the VA imposed regulations apply.

Attorney Macrina G. Hjerpe is a partner in the Providence law firm Chace Ruttenberg & Freedman. She practices in the areas of Estate Planning, Probate, Estate Administration, Trust Administration, Trust Litigation, Guardianship, Business Succession Planning, Asset Protection Planning, Elder Law and Estate Litigation.