Proposed VA Regulations Would Create Transfer Penalties for Pension Applicants

The Department of Veterans Affairs (VA) is proposing new regulations that would establish an asset limit, a look-back period and asset transfer penalties for Veterans and their sole surviving spouses who applying for VA needs-based benefits, known as “Aid and Attendance” or “Death Pension”.  Currently, there is no look back on transferring assets prior to applying for these needs-based benefits, such as aid and attendance.

In its explanation of the new regulations in the January 23, 2015 Federal Register, the VA says the changes are a response to a 2012 Government Accountability Office (GAO) report, which recommended changes to “to maintain the integrity of VA’s needs-based benefit programs.” The VA also offers as a reason for the new rules to “reduce opportunities for attorneys and financial advisors to take advantage of pension claimants.”

The proposed rules would establish a 36-month look-back period and a penalty period of up to 10 years for those who dispose of assets to qualify for a VA pension. The penalty period would be calculated based on the total assets transferred during the look-back period to the extent they would have exceeded a new net worth limit that the rules also establish.  The proposed net worth limit would be equal to Medicaid’s maximum community spouse resource allowance (CSRA) prevailing at the time the final rule is published and would be indexed for inflation as the CSRA is.

The amount of a claimant’s net worth would be determined by adding the claimant’s annual income to his or her assets. The VA would not consider a claimant’s primary residence, including a residential lot area not to exceed two acres, as an asset.  But if the residence is sold, proceeds from the sale would be assets unless used to purchase another residence within the calendar year of the sale. Any penalty period would begin the first day of the month that follows the last asset transfer, and the divisor would be the applicable maximum annual pension rate in effect as of the date of the pension claim.

The proposed rule also defines and clarifies what the VA considers to be a deductible medical expense for all of its needs-based benefits, and proposes statutory changes pertaining to pension beneficiaries who receive Medicaid-covered nursing home care.

The proposed rules appear to be an effort to circumvent Congress, where legislation similar to that proposed in the new regulations has been languishing for the past two years.

The bottom line, it will become very difficult for a “war time” veteran or the sole surviving spouse to qualify for a benefit they are entitled as a result of their service to our country.

In addition, if you are thinking I will go ahead and transfer assets now to get the clock running, must remember that the look back period for Medicaid is 5 years.  Thereby, qualifying for Veterans Benefits, but imposing a Medicaid penalty for the initial transfer, and an additional penalty or spend down in order to get below the $2000 limit that Medicaid allows. A very devastating trap for the unwary.

My suggestion, contact your congressperson and senators to let them know that you oppose these changes, most are unaware that changes have even been proposed, they need to be informed!

Need to know who your representatives are or a suggested wording for a letter or phone call, than e-mail me and we will get that for you.

[email protected]

Please forward this letter to your contacts, this is a bad deal for those who served their country during war time and now need help paying for increased medical expenses as they age, please spread the word so these proposed regulations never see the light of day.

Thanks, Richard


Sherman/Gainesville Office
209 East Main Street
Whitesboro, Texas 76273
Phone: 1-800-939-9093
Fax: 1-903-546-5562
By Appointment Only

Plano Office
1400 Preston Road, Suite 400
Plano, Texas 75093
Phone: 1-800-939-9093
Fax: 1-903-564-5562
By Appointment Only

Denton Office
1308 Teasley Lane, Suite 246
Denton, Texas 76205
Phone: 1-800-939-9093
By Appointment Only