There’s potential money out there for wartime veterans and the surviving spouses of wartime veterans through the Veterans Affairs Improved Pension.

I want to encourage attorneys who practice in elder law to consider becoming accredited with the Department of Veterans Affairs, because there are about 330,000 veterans and only 44 accredited attorneys in our state.

Program Basics

Although not strictly necessary, qualification for this program generally arises when a qualified applicant is facing unreimbursed medical expenses – most commonly, long-term care costs.

The majority of applications for Improved Pension require the following:

• a 90-day deployment for other than training purposes with at least one day landing in a wartime period (qualification is two years for post-Vietnam wartime service);

• applicant either residing in a skilled nursing facility or providing an accompanying medical affidavit substantiating the care needs;

• Income for VA Purposes (IVAP) that is less than the Maximum Annual Pension Rate (MAPR) amount they could receive (calculated as gross household income minus unreimbursed medical expenses that exceed 5% of the MAPR); and

• “covered assets” that don’t exceed $159,240 in 2025 (adjusted annually for inflation). Some notable exclusions from the definition of covered assets include vehicles for family transportation purposes, a home on no more than 2 acres, and reasonable personal effects. There’s also a three-year “look-back” on transferring assets.

There are three levels of pension qualification:

• Base;

• Base + Homebound

• Base + Aid & Attendance

In general, these qualification levels are determined by the health of the veteran, if alive, or the health of the spouse if the veteran is deceased. None of the payments are taxable income and the Homebound or Aid & Attendance additions are not countable income for Medicaid.

If a veteran qualifies, they may receive up to $28,300 annually ($33,548 if they’re married) and a surviving spouse may receive up to $18,187 annually. This can put a substantial dent in long-term care costs, and, unlike Medicaid, there is no estate recovery program.

Common Uses for the VA Pension

• Any time you have a client in a long-term care facility that doesn’t accept Medicaid, use of the VA will stretch out your clients’ funds. Depending on the cost of care, this may or may not be adequate to solve their financial problems indefinitely, but it will help.

• Paying for at-home care. Waiver programs are often unable to adequately assist in paying for at-home care, but pension payments can help clients afford significantly more care.
  
  For example, a single veteran with $2,000/month in income may need 20 hours per week of care. At $35/hour for a caregiver they can afford about 14 hours a week (assuming they don’t eat food, pay utilities, etc.). If the veteran receives Base + Aid & Attendance, the income becomes about $4,350/month, allowing them to easily afford 20 hours a week and reserves over $1,500/month of income to pay for necessities.

• Paying family for at-home care. Many of our clients require help provided by loved ones. Caregiver agreements are crucial if money is going to change hands because of Medicaid rules. Sometimes there is no payment being made because either the child feels guilty charging their parent for the services, or the parent may simply be unable to afford to pay anything.
  
  A caregiver agreement can qualify payments to a child as an unreimbursed medical expense if the applicant is rated Homebound or Aid & Attendance, and the supplemental income allows the child to be compensated for providing crucial services, potentially reducing their own economic strain.

• Bridging the gap between the 3- and 5-year look-back periods. Sometimes clients give away money. Most commonly, in my experience, because they think the gift tax exclusion is somehow a “safe haven” for Medicaid divestment rules. Sometimes the client’s best option is to wait out the remainder of the Medicaid “look-back” period, and the VA can be used to reduce their cost of care shortfall between years 3 and 5.

• When the client has modest assets (we’ll call that under $160k) or the home is the only asset. They qualify, get the VA money rolling in while you consider the Medicaid plan. It will supercharge their savings.

• When the income gap between income and cost of care is not great. Not everyone is paying $12,000/month for care. If a person has $100,000 in total assets with an income of $3,000 and a cost of care of $6,000 from a community-based residential facility (CBRF), their savings will last about 33 months. With the VA pension paying about $2,350/month of that care cost, their savings would last almost 13 years (considerably longer if the savings are invested because the shortfall is reduced to $7,800/year).

• Preplanning for long-term care. If a client is interested in planning for long-term care in advance of need, they don’t know if or when they will need care, which means you don’t know their assets, income, or care level. It's hard to decide which assistance program will be best for them in the future, right? You don’t need to choose now – you merely need to walk the line between both programs so the prospective Medicaid planning you might recommend doesn’t ruin VA eligibility.

Notable Differences from Medicaid Planning

• The VA will count the entire property value of a life estate toward an applicant’s net worth (I’d argue that life estates are, and always were, a terrible idea anyway);

• any trust from which payment can be made to the applicant (including a pooled special needs trust) will count toward their net worth;

• any trust established and controlled by the applicant, regardless of the identity of the beneficiary, will be included in their net worth (read: grantor applicant should not be trustee, don’t use grantor trust powers in trusts holding disqualifying assets);

• the maximum penalty period for the VA is 5 years;

• purchase of a single premium immediate annuity (SPIA) will either be a divestment or countable asset depending on the terms;

• no estate recovery;

• IRAs are countable regardless of which spouse is the titled owner;

• the benefit is a monthly cash payment to the applicant’s bank account – no facility or provider participation is required; and

• you need to be accredited by the Department of Veterans Affairs to provide advice on this program.

When to Consider the Improved Pension Program

I’ve provided VA planning for 15 years, and the vast majority of my cases have been clients seeking counsel because they are concerned about “nursing home costs.” Very few of them have come to me aware of this program or because I’m accredited.

Ask all of your long-term care clients whether either spouse served in the military. It’s an easy question to put on your intake form. Then, any time you have a veteran or spouse with whom you’re considering Medicaid planning, you need to weigh whether the VA pension is an appropriate addition or even substitution for Medicaid.

For a number of your clients, Medicaid isn’t necessarily “best,” it’s what you may know best. There’s a common saying that “if the only tool you have is a hammer, everything looks like a nail.” For the sake of your clients, add another tool to your toolbox.

This article was originally published on the State Bar of Wisconsin’s Elder Law and Special Needs Blog. Visit the State Bar sections or the Elder Law and Special Needs Section webpages to learn more about the benefits of section membership.