After several years of waiting, the Veterans Administration (“VA”) has published new rules that make it more difficult to qualify for needs-based VA Benefits. In January 2015, the VA published a set of proposed rules that would amend 38 CFR Part 3, which covers net worth, asset transfers and income exclusions for needs-based benefits. There was a comment period and a lot of waiting and wondering. The VA finally published its new rules in the Federal Register on October 18, 2018.
Under the old rules there was no look-back period for VA benefits. You could give all of your assets away today and apply tomorrow. Irrevocable trusts are commonly used for VA qualification. These trusts will continue to be important tools. However, trust planning will now have to be completed years in advance. The new rules, which go into effect on October 18, 2018, will penalize any gifts made in the last 36 months. An investment in an annuity will also be penalized. The penalty period could be as long as 5 years. There are other requirements in the new rules, but these are the most important to veterans and the spouses of deceased veterans who will apply for benefits to help defray the cost of long-term care.
The VA and the Government Accountability Office have said that the reason for these new rules is to maintain the integrity of the VA’s needs-based benefit programs. This should not be a surprise. We may see more shifts in this direction over time. The median age continues to rise. The rate of chronic illnesses is increasing. Our system of delivering and paying for medical services has no mechanism to encourage people to make good health choices. The number of people over 65 is skyrocketing. One in nine Americans over age 65 have Alzheimer’s. Fewer people will be working and paying taxes. Qualification for all needs-based programs will have to get harder over time.
If you need to qualify for VA assistance now, you should get to work today. If you will need to qualify in the future, you should understand that any transfers must be made at least three years in advance. If long-term care is something that is not on your mind, you should consider buying a long-term care insurance policy, sleeping longer, eating better, and exercising.