The US Department of Veterans Affairs (also known as the "VA") expresses some of our nation's respect and gratitude to US military veterans by providing various benefits to veterans, their surviving spouses, and dependent children. Unfortunately, many veterans follow bad advice to pursue the VA's Aid and Attendance benefit to pay home healthcare and assisted-living costs, and unwittingly disqualify themselves for more important benefits in the future.
The VA's Aid and Attendance benefit provides a small pension to a veteran, the veteran's surviving spouse, or the veteran's dependent children, if they are in the nursing home, blind, or in substantial daily need for assistance from another person to perform basic functions required for everyday living. Those basic living functions include the ability to dress, bathe, adjust or use special prosthetic or orthopedic appliances, or use the bathroom. The need for living assistance may result from either physical or mental disability. The amount of the pension varies around $2,000, depending upon the benefit claimant's income level and household size.
Aid and Attendance claimants must satisfy the VA's "net worth" evaluation to qualify for the pension. The VA considers a claimant's income, expenses, assets, and debts to determine whether the claimant's financial resources are sufficient to meet the claimant's basic needs without help from VA. The VA will not pay the pension if the claimant's "assets are large enough that the claimant could use these assets to pay living expenses for a reasonable period of time." The VA does offers no clear net worth eligibility guideline, but some people use a rule of thumb that eligibility is more doubtful if a single claimant's net worth is $50,000 or more, or if a married couple's net worth is $80,000 or more.
Some annuity sales people make persuasive annuity sales pitches to veterans and their families. The typical sales pitch advises a client to buy an irrevocable annuity that pays enough money each month to cover assisted-living facility fees or other living expenses after the client qualifies for the Aid and Attendance benefit. If the client's wealth is too high to qualify for the Aid and Attendance benefit, the salesperson will advise the client to give assets away to family members to reduce the client's net worth.
Congress has been considering a rule change to disqualify Aid and Attendance benefit claimants for giving away assets for several years. After Congress changes the law, the annuity and gift strategy will no longer work. The big problem is that federal and state laws already punish older people for buying certain kinds of annuities and giving away assets.
Medicaid pays nursing home and home healthcare bills for people that cannot afford to pay those costs (the average monthly nursing home cost in Indiana is more than $5,900). In order to keep people from giving away their assets to speed up Medicaid eligibility, Medicaid law disqualifies claimants if they apply for Medicaid within five years after buying certain kinds of annuities or giving away assets.
The tragic problem that ignorant or deceptive "advisors" create for veterans is that the annuity and gift advice sacrifices critically important Medicaid eligibility for much less valuable Aid and Attendance benefits. For example, consider a veteran's investment of $100,000 in an irrevocable annuity (the technical term is "immediate annuity"). The veteran may get around $2,000 per month to pay a $3,000 per month assisted-living bill. That strategy comes back to bite a veteran whose health declines enough to require nursing home care because the annuity investment may disqualify the veteran for Medicaid benefits to pay a $6,500 per month nursing home bill.
Veterans and their families should never rely on non-lawyer presentations about VA pensions and Medicaid eligibility. Some of the annuity sales people described in this article make presentations to people at veterans organizations, senior centers, assisted-living facilities, and nursing homes. Just because they have glossy brochures and fancy slideshow presentations does not mean that they know all of the legal consequences of the investments that they promote. Only an experienced elder law attorney can offer an unbiased comparison of the alternatives.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and Jeff is a Fellow of the American College of Trust and Estate Counsel. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator and was the 2014-15 President of the Indiana State Bar Association.
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