On September 18, 2018 the VA published a new comprehensive set of rules amending 38 CFR Part 3. The new rules address issues of net worth, asset transfers and income exclusions for needs-based benefits under the VA pension program.

The new VA pension rules are effective as of October 18, 2018. This is a significant change; as no lookback period, such as the one in effect for Medicaid benefits for many years, previously existed for VA benefits.

VA Lookback Rule Background

Under the new rules, the VA will review transfers made during the 36-month period prior to the application for benefits to determine whether any “covered assets” were transferred for less than full market value. The VA may require the claimant to present tax return transcripts;the terms of a gift, trust or annuity; or evidence of title to help determine whether gift transfers have been made within the 36-month period. Any gift transfers within the 36-month period will delay the effective date for VA benefits.

VA Lookback Period Defined

The lookback period for asset transfers is 36 months immediately preceding the date the VA receives an original pension claim or a new pension claim following a period of non-entitlement. The lookback period does not include any transfers made prior to October 18, 2018, so gift transfers before that date will not affect the applicant’s eligibility for benefits.

Penalty Period for VA Pension Applicants

To calculate the penalty period, the VA will use the Maximum Annual Pension Rate (MAPR) for pension with an Aid and Attendance allowance with one dependent for veterans and surviving spouses who apply. This number is currently $2,169, so the VA will divide the value of the asset transferred by $2,169. The result will be the number of months for which the applicant will be ineligible to receive benefits. This “penalty period” will not exceed five years, and can be reversed in full or in part if the applicant is able to get the assets back prior to submitting a pension application or within 60 days of the VA’s determination that the penalty period applied.

Exclusions to Penalty for VA Pension Applicants

Transfers made as a result of fraud, misrepresentation or unfair business practices related to the sale or marketing of financial products or services for the purpose of creating pension entitlement will not constitute a “covered asset” and will not be penalized. However, a claimant must provide evidence to support his or her assertion that fraud, misrepresentation, or unfair business practices occurred. Transfers to a trust established for a child rated by the VA as incapable of self-support pursuant to 38 CFR 3.36 will not be penalized as long as there is no way the trust assets can benefit the veteran, veteran’s spouse, or veteran’s surviving spouse.

For more information on the VA pension rules, please contact Judy Wagner, Amanda Carden Agins, Lisa Powers or Megan Barkley in the Wills, Trusts & Estates Practice Group, or the Harris Beach attorney with whom you usually consult.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale, and White Plains, as well as New Haven, Connecticut, and Newark, New Jersey.