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From
E.
Frederick Petersen III
The Petersen Law Firm
One Corporate Center
10451 Mill Run Circle; Suite 400
Owings Mills, MD 21117
(443) 392-2585
I have over 20 years of experience helping my clients
and referral partners’ clients develop and enhance their
estate plans by incorporating up-to-date wealth
preservation techniques. Contact me to learn how the New
STANDALONE IRA TRUST can benefit your clients!
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Volume 2,
Issue 8 |
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Understanding
the Opportunities with Aid & Attendance Benefits
A prior issue
of The Wealth Counselor addressed the planning
opportunities that exist with planning for Medicaid (Medi-Cal
in California), particularly where the client's advisors
work together to create a plan that addresses all
aspects of the client's planning needs. This issue
addresses a related topic, VA Aid and Attendance pension
benefits.
Even advisors who focus on higher net worth clients
should not discount the opportunities that exist with
Aid and Attendance pension benefits. There are now over
25 million US veterans eligible for some type of VA
benefits, many of whom have no idea Aid and Attendance
pension benefits exist (and their local VA office won't
tell them about it!). Moreover, World War II veterans
are dying at the rate of approximately 1,800 per day.
Thus, the need for this type of planning is greater than
ever.
Many of the veterans or their surviving spouses you
discuss this planning with may not qualify, but they
could become traditional wealth planning clients.
Alternatively, this benefit may be of interest to their
aging parents, siblings or other family members.
Planning Tip: While Aid and
Attendance pension benefits are only available to a
limited segment of the population, the general lack
of knowledge regarding this benefit makes it a
marketing opportunity for all wealth planning
professionals, not just those who focus on Elder
Law.
What is Aid & Attendance?
Aid and Attendance is a "special monthly pension"
available to wartime veterans or surviving spouses of
wartime veterans. Aid and Attendance is not actually a
stand-alone benefit. Rather, it is an additional
allowance that a veteran or surviving spouse who is
already entitled to certain VA pension benefits (because
of his or her wartime service and non-service-connected
disability) may additionally be entitled to upon meeting
certain medical and financial requirements. Aid and
Attendance differs from compensation, which is available
to all veterans who suffer from a service-connected
disability. Table 1 below identifies periods of war for
purposes of all VA pension benefits.
Planning Tip: Aid and Attendance
pension benefits are additional veterans' benefits
available to wartime veterans who need the "aid and
attendance" of another to meet their daily needs.
Prerequisite Benefits
A veteran or surviving spouse (called a claimant by the
VA) must first be eligible for what the VA refers to as
"regular pension." Regular pension is available when a
wartime veteran (one with 90 days of active duty, and at
least one day beginning or ending during a period of
War) has limited income and assets and suffers from a
non-service-connected permanent and total disability. In
some circumstances, being over the age of 65 may qualify
a claimant without the need to show a disability.
Permanent and total disability includes a claimant who
is:
- In a nursing home;
- Determined disabled by the Social Security
Administration;
- Unemployable and reasonably certain to continue
so throughout life; or
- Suffering from a disability that makes it
impossible for the average person to stay gainfully
employed.
Asset & Income Requirements
The financial eligibility requirements of Aid and
Attendance benefits address a claimant's net worth and
income. A married veteran and spouse can currently have
no more than $80,000 in countable assets (less for a
single veteran or surviving spouse), which includes
retirement assets but excludes a home and vehicle.
However, the $80,000 limit is a guideline only; it is
not a rule set by the VA. The VA looks at a claimant's
total net worth, life expectancy, income and medical
expenses to determine whether the veteran or surviving
spouse is entitled to special monthly pension benefits.
Planning Tip: Many times the
advisor's most difficult task in this area is to
reduce a claimant's assets down to the applicable
level (or what one hopes will be acceptable to the
VA). Like Medicaid planning, this often requires
income tax planning and the utilization of financial
products such as annuities.
There is no income limit for VA pension benefits. There
is, however, what the VA refers to as Income for VA
Purposes (IVAP), or a claimant's gross income from all
sources less countable medical expenses. If a claimant's
IVAP is equal to or greater than the annual benefit
amount, the veteran or surviving spouse is not eligible
for benefits. Tables 2 and 3 show the applicable income
and pension amounts for both veterans and surviving
spouses.
Is the Claimant Housebound?
If a claimant qualifies for regular pension and is
housebound, the claimant's maximum allowable income
increases (as does the annual benefit amount) to the
special monthly pension. The VA defines housebound as
being substantially confined to the home or immediate
premises due to a disability that will likely remain
throughout the claimant's lifetime. A veteran with no
dependents who is housebound is eligible for benefits of
up to $13,356 in annual income.
Unreimbursed medical expenses will reduce a claimant's
income dollar for dollar. But remember, to be eligible
for a special monthly pension for being housebound, the
claimant's IVAP must be less than the annual income
threshold.
To illustrate, a veteran with exactly $13,356 in annual
income would not be eligible for a special monthly
pension for being housebound. However, if that veteran
was able to show annual income of $20,000 and
unreimbursed medical expenses of $25,000, the veteran
would be eligible for $13,356 in annual special pension
(paid on a monthly basis) because the veteran has
negative IVAP. A surviving spouse with no dependents who
is housebound can have an annual IVAP of up to $8,957.
Does the Claimant Require the Aid and Attendance
of Another?
If a claimant can show, through medical evidence
provided by a primary care physician or facility, that
the claimant requires the aid and attendance of another
person to perform activities of daily living, that
veteran or surviving spouse may qualify for an
additional monthly special pension commonly referred to
as aid and attendance pension benefits.
The VA defines the need for aid and attendance as:
- Requiring the aid of another person to perform
at least two activities of daily living, such as
eating, bathing, dressing or undressing;
- Being blind or nearly blind; or
- Being a patient in a nursing home.
Tables 2 and 3 below show the applicable pension amounts
for each type of VA pension.
Planning Tip: The maximum pension
for a married veteran is $1,801 per month ($21,615
per year), while the maximum pension for a veteran's
widow is $1,165 per month ($13,976 per year). The VA
pays this pension directly to the claimant, and it
makes no difference whether the claimant receives
medical care at home, in an assisted living facility
or in a nursing home.
Qualification
As stated above, the VA looks at a claimant's total net
worth, his or her life expectancy, and his or her income
and expenses to determine whether the claimant should
qualify for special monthly pension. Unlike Medicaid,
there is no look-back period and no penalty for giving
assets away. However, one must use caution when
considering a gifting strategy to qualify a veteran or
surviving spouse for special monthly pension benefits,
as this will cause a period of ineligibility for
Medicaid which could be as long as five years. Other
Medicaid planning strategies may apply when trying to
qualify a veteran or surviving spouse for special
pension with aid and attendance.
Planning Tip: The client's advisors
(particularly the attorney and financial advisor)
must work together to determine the best combination
of strategies and financial products that will gain
eligibility for special monthly pension but not
disqualify the client from Medicaid.
For example, Bob, an unmarried wartime veteran, suffers
from dementia and needs help dressing, taking medication
and bathing. He has assets of $150,000 and social
security income of $1,100. Bob lives at home and pays a
home health aide $2,000 per month. He has negative
income for VA purposes (the applicable annual rate is
$18,234 or $1,519 monthly) and is running short
$900/month in covering his medical expenses. However,
Bob's assets will most likely prevent him from receiving
improved pension with aid and attendance.
To qualify Bob for special monthly pension with aid and
attendance, one option might be for him to use $100,000
of his assets to purchase an immediate annuity
structured to pay less than $900 per month (the annuity
should be actuarially sound so as not to cause a problem
with Medicaid eligibility). Even with the annuity
payment, Bob can a show negative annual income, assets
of only $50,000, and he can show a medical need for the
benefit. Therefore, Bob would most likely be eligible
for the maximum annual pension rate of $18,234 (paid in
monthly payments of $1,519.50).
The Application Process
While the application process for special monthly
pension can be agonizingly slow - some applications take
over a year before the VA makes a decision - the benefit
is retroactive to the month after application
submission. Having the proper documentation in place at
the time of application (for example, discharge papers,
medical evidence, proof of medical expenses, death
certificate, marriage certificate and a properly
completed application) can cut the processing time in
half.
Planning Tip: Benefits are
retroactive to the month after application
submission, so advisors should help clients apply as
quickly as possible while also helping to ensure
that the application is complete.
Conclusion
Even advisors who do not wish to practice in the area of
Aid and Attendance special pension benefits should be
able to recognize the opportunity for prospective and
existing clients. They should also be ready to recommend
someone who can assist in this area.
Because of the impact transfers may have on the client's
eligibility for other benefits such as Medicaid, it is
critical that the client's advisor team work together to
maximize the benefits available to the client.
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