Creative Dispute Resolution • Tough Litigation

New Senate Bill Calls for Assessment of a Transfer Penalty for VA Pension Applicants

By Wendy J. Ashby, Esquire, Elder Law Attorney for Ashby Law Offices, LLC, Accredited by the Veterans Administration

A bill was introduced on June 6, 2012 by Senators Ron Wyden and Richard Burr, as well as in the House, that would impose transfer penalties for veterans applying for Aids and Attendance similar to the transfer penalties in place under Medical Assistance laws. This would serve to effectively deny VA pension assistance benefits to any veteran if they have made certain gifts or other transfers for less than fair market value within 3 years of applying for the pension or from the date of the transfer, whichever occurs later. If the VA deems such a transfer was made, a penalty will be applied to any assets transferred from the “corpus of the estate” of the veteran, spouse, surviving spouse or the veteran’s dependent child during this period. This penalty will be calculated by dividing the value of the transferred asset by the amount of the maximum monthly pension the claimant would have been entitled to receive to determine the number of months for which the Veteran applicant will be ineligible to receive benefits.

An example how the penalty will be triggered and calculated follows:

Ted, a single veteran, paid $20,000 for his granddaughter’s college education in January. He becomes ill 6 months later in July and will need to relocate to an assisted living facility. Ted files an application for Aid and Attendance through Veterans Affairs. Ted would be entitled to $1,703 per month toward his care, if he had not made the gift to his granddaughter. When Ted applies for the pension the VA will look back 36 months for any gifts made. The penalty period for the $20,000 transfer will be 12 months ($20,000÷$1703=11.74 months) during which time Ted will be ineligible to receive the VA benefit.

The maximum penalty imposed for transfers will be 36 months. The penalty will not be imposed if the transferred assets are returned to the applicant or if the imposition of the penalty would impose an undue hardship upon the claimant.

The new legislation provides other components that will create major changes to the current VA pension, such as:

  1. Purchased annuities will subject to the transfer penalty;
  2. The VA will be required to implement guidelines for a “hardship waiver”; and
  3. The effective date of the new legislation will be one year after the enactment date.

The proposed language of this new Senate bill can be found in Senate Bill 944 and the House version in House Bill 2189.

Despite the proposed eligibility rules, VA pension planning will continue to be available and necessary for many veterans and surviving spouses of veterans. Even if new legislation is passed, this legislation would not take effect until one year after its enactment and will apply only to pensions applied for or redeterminations made after that date. Therefore, veterans and surviving spouses will still be able to plan under current, more favorable rules for some time.

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