In January the Department of Veterans Affairs (VA) announced changes to agency regulations for calculating eligibility for Special Monthly Pensions (such as New and Improved Pension, Aid and Attendance and Housebound Benefits). When the rule is adopted it will result in sweeping changes in how the VA calculates eligibility for pensions, and it will result in penalties for transferring assets out of the veteran’s name within three years of application. Through this change, the VA will look more like Medicaid.

Special Monthly Pensions are for veterans who served for 90 days or more during active wartime who were honorably discharged. They may qualify for benefits if their health care expenses leave them without adequate resources to live. Surviving spousal benefits are also available when the veteran is deceased.

Income and Asset (Net Worth) tests are performed to determine eligibility, and there is currently no penalty for transferring assets.

Currently to calculate Income, qualifying medical expenses are deducted from the veteran’s (or spouse’s) income to calculate adjusted income. In 2015 a veteran with no dependents applying for A&A who does not have $1789 per month in adjusted income may be eligible for an amount to bring his or her income up to $1789 (referred to as Maximum Annual Pension Rate or MAPR). The monthly MAPR for a veteran applying for A&A with one dependent is $2120. There are different minimum eligibility standards for different categories of benefits (such as New and Improved Pension, A&A, Housebound Benefits and veteran alone or with dependents, widows, surviving children, etc.), but that is the general scheme. Income minus qualifying medical expenses = adjusted income which is subtracted from the MAPR to determine the amount the veteran or spouse is eligible to draw.

Currently to calculate Assets (Net Worth) the VA has allowed the applicant to have $80,000 or less to qualify with the residence and automobile excluded.

So remember, the VA already looks at Income and Assets (Net Worth), and you have to meet both tests to qualify for a Special Monthly Pension.

The Proposed Rule

Under the proposed rule Income and Assets (Net Worth) will still be considered, but there will be more some changes in what counts and how it counts.

Transfer Penalty:

 Applicants who give away their property within three years of applying for benefits will be penalized. In other words, there will be a three year look back, and transfers can result in a penalty lasting as long as ten years, meaning that the veteran cannot draw benefits for the length of the penalty. To calculate the penalty the amount transferred within three years of application will be divided by the monthly MAPR in effect at the time of the application to arrive at the number of months of penalty. The penalty begins to run at the time of the transfer.

The New Income Calculation: Gross income will continue to consist of payments from any source except for casualty losses and capital gains from the sale of an asset. Medical expenses will continue to be deducted from gross income to calculate adjusted income. The applicant’s adjusted income must fall below the MAPR to qualify for a pension.

The New Asset (Net Worth) Calculation: Allowable net worth will line up with Medicaid’s community spouse protected amount of $119,220. This amount is calculated by adding all the resources not excluded plus annual adjusted income for the year.

To determine net worth the VA does exclude the principal residence and a “reasonable amount of land” around the house, capped at two acres. As under current rules, the automobile and household items do not count so long as they, too, are “reasonable.” Basic living expenses such as food, clothing and shelter can be deducted from the year’s income that is included in the calculation for Net Worth level.

There is one more possible adjustment required to arrive at the final Net Worth. Remember those proceeds from casualty losses and capital gains from the previous year that did not count as income? In calculating the Assets (Net Worth), those amounts may be added to this year’s assets to arrive at countable Net Worth.

Contact your County VA Office to apply for a Special Monthly Pension or to obtain more information about eligibility.

Veteran Pension Rates (MAPR) are published yearly.