VA Proposed 3 Year Look Back

VA Law Change Proposals1

Veterans administration

Proposed 3 year look-back

and other law changes

Victoria L. Collier, CELANational Expert and Trainer on VA Pension Benefits

Co-Founder, Lawyers With Purpose

© 2015 Lawyers With Purpose


• Federal Register Vol. 80, No. 15, Part IV

• Department of Veterans Affairs 38 CFR Part 3 Net Worth, Asset Transfers, and Income Exclusions

for Needs-Based Benefits Proposed Rule

January 23, 2015



1) To maintain the integrity of the pension program

and

2) To implement recent statutory changes

• Real Purpose – To stop attorneys, financial advisors and claimants

from deliberate impoverishment to qualify Save money

PURPOSE OF AMENDMENTS



• Pertaining to The evaluation of Net Worth and Asset Transfers for pension and Identify specific medical expenses that are

deducted from countable income• Statutory Changes to:

Pension beneficiaries receiving Medicaid-covered NH care

Income exclusions for certain disabled veterans• Non-Statutory Changes to:

Income exclusions pertaining to annuities

Establish new requirements



1) To respond to recent recommendations made by the Government Accountability Office

2) To maintain the integrity of VA’s needs-based benefit programs and

3) To clarify and address issues necessary for consistent adjudication of pension and parent’s DIC claims

Intended effect of changes



• Proposed §3.274 – establish a clear net worth limit

$119,220 • (Medicaid’s maximum community spouse resource

allowance). Indexed for inflation

• (increase when Social Security increases; same increment)

Includes• Assets AND Annual Income

Calculated when VA receives• Original or New pension claims;• A request to establish a new dependent; or• Information that net worth has increased or decreased

Effective Dates• Set when rates are adjusted due to net worth

Core changes



• Proposed §3.275 – calculate assets

Primary Residence exempt up to 2 acres

If residence sold, $ is an asset UNLESS proceeds are used to purchase another residence within the CALENDAR year

Core changes



• Proposed §3.276 – pre-application asset transfers

Establish a PRESUMPTION, absent clear and convincing evidence showing otherwise, that asset transfers made during the look-back period were made to establish pension entitlement.

36 month look-back period Penalty period not to exceed 10 years Penalty Begins

• Month after last transfer completed

Core changes



• Proposed §3.278 – define and clarify what VA considers to be a deductible medical expense for all of its needs based programs

Defines • Activities of Daily Living (ADLs); and

Dressing, bathing, toileting/incontinence, transferring, eating

• Instrumental Activities of Daily Living (IADLs); and Medication administration; using a phone, etc.

• Custodial Care Needing assistance with 2 ADLs OR assistance because of a mental

disorder for a person who is unsafe if left alone due to the mental disorder

Payments to Independent Living Facilities, generally, are NOT medical expenses, nor are payments for IADLs

Limit on hourly rate for home health care – nat’l average $21/hour

Core changes



• Gifts include transfers of “covered assets” to: People Trusts Annuities

Penalties for gifts for less than FMV



• Definition: An asset that was part of net worth, was transferred for less than fair market value, and would have caused or partially caused net worth to exceed the limit had the claimant not transferred the asset.

• Penalty periods are calculated based on the “covered asset amount”, not necessarily the entire amount transferred

Covered assets



• The price at which an asset would change hands between a willing buyer and a willing seller who are under no compulsion to buy or sell and who have reasonable knowledge of the relevant facts.

Fair market value



• Definition:

Selling, conveying, gifting, or exchanging an asset for an amount less than the fair market value of the asset

Transfer for less than FMV



• A transfer for less than FMV would also include:

Any asset transfer to or purchase of any financial instrument or investment that reduces net worth and would not be in the claimant’s financial interest were it not for the claimant’s attempt to qualify for VA pension by transferring assets to or purchasing such instruments or investments.

Annuity: a financial instrument that provides income over a defined period of time for an initial payment of principal.

Financial investments



• “Uncompensated value” of an asset would be defined as the difference between its FMV and the amount of compensation an individual receives for the asset.

• In the case of an asset transferred to a financial instrument or investment such as a trust or an annuity, “the uncompensated value would mean the amount of money or the monetary value of other assets so transferred.”

Inconsistency in proposed law



• 38 U.S.C. 101(13) – uses the technical meaning of the word “compensation”; whereas, the VA is trying to broaden the definition to a more general meaning so that it includes trusts and annuities.

• This is arbitrary, capricious and not within the clear intent of Congress

Violates the intent of Congress



• Also a trigger for transfer penalty.

• Trust: a legal arrangement by which an individual (the grantor) transfers property to an individual or an entity (trustee), who manages the property according to the terms of the trust, whether for the grantor’s own benefit or for the benefit of another individual.

Trusts



• As defined by VA, ALL trusts would be subject to transfer of assets penalty, including Revocable Living Trusts

We (you, I, all of us) must oppose and have the VA specifically clarify that the only trusts subject to the look-back and penalty are irrevocable trusts

ALSO, the VA anchors to SSI 42 U.S.C. 1382b as having “similarities between SSI and VA’s pension program,” THUS – this is our opportunity to comment that• Assets in SNT’s are exempt and without transfer

penalties for under age 65• Transfers to others with disabilities is not penalized

Trust clarifications needed



• The VA will not count as a covered asset any assets transferred to a TRUST for the benefit of the VETERAN’s child (not the spouse’s child) who is rated as being permanently incapable of self-support per 38 CFR 3.356

Exception for transfers to a trust



• VA’s formula would determine a penalty period:

in months by dividing the covered asset amount by the applicable maximum annual pension rate

(/12) as of the date of the pension claim rounded down to the nearest whole number

Penalties for transfers of covered assets



• Penalty based on Maximum Annual Pension Rate with Aid and Attendance

Married Veteran $2,120• $100,000 / $2,120 = 47 month penalty

Single Veteran $1,788• $100,000 / $1,788 = 55 month penalty

Surviving Spouse $1,149• 100,000 / $1,149 = 87 month penalty

Different penalties fordifferent claimants



• Presumption: all transfers made in the look-back period were for the purpose of VA entitlement

• Rebuttal: With clear and convincing evidence that The transfer was a result of fraud,

misrepresentation, or unfair business practices related to sale of financial products or services for the purpose of obtaining VA benefits

Rebutting the presumption



• A penalty can be cured IF: ALL assets are returned within 30 days of filing the

VA application AND If evidence of the returned assets is provided to

the VA within 60 from a VA denial decision

Curing the transfer penalty



• Key Take Away Items:

Health Care Providers defined to include a nursing assistant or home health aide who is supervised by a licensed health care provider

Custodial Care – • regular assistance with two or more ADLs

OR

• Regular supervision because an individual with a mental disorder is unsafe if left alone due to the mental disorder

Deductible medical expenses 3.278



• Based on the definition of Custodial Care ILFs do provide “regular supervision because an

individual with a mental disorder is unsafe if left alone due to the mental disorder”

THUS, the ILF should• NOT have to provide 2 ADLs nor have a 3rd party provide

2 ADLs• Be considered “medical expense” deduction in that they

are providing “custodial care” which is synonymous with “medical care” when the person has a mental disorder

• HOWEVER, the VA has no intent of allowing ILF fees as deductible medical expenses

ILFs



• Comment period ended 3/24/15 Senator Burr (drafter of the Pension Protection Act)

has asked VA to extend the comment period 60 days• No indication of it being extended

• 883 Comments listed on website as of 3/27/15

Can you still comment?



• Quote from VA spokeswoman, Megan Lutz said, the agency cannot estimate “when the final regulations will be ready for publication in the Federal Register.”

See article by Brian Bowling, http://triblive.com/news/allegheny/8032723-74/veterans-benefit-living#axzz3WXnnYkdi

VA comment


http://triblive.com/news/allegheny/8032723-74/veterans-benefit-living#axzz3WXnnYkdi




• Letter from Christina DiTucci, VBAVACO, 5/8/15• RE: James Swain Letter RE: proposed VA rule

changes to pension

• “…We anticipate publishing the final rule during fiscal year 2016.”

• Fiscal year 2016 begins October 1, 2015.

VA’s Anticipated timeline



• Do we “Plan” or “Punt” until we have definitive answers?

• We: Advise our clients of the uncertainty and the pros

and cons We include an acknowledgment of the proposed

law changes and a “non-guarantee” clause in our legal services agreement

We then do as our clients request

What do we do in the Meantime?



• If you are VA accredited or want to be…

• If you want the latest information on VA benefit qualification and processes…

• If you want the only application software system in the industry that

Manages your caseload database and Manages your workflow and Provides workflow reports

Staying informed



• Join Lawyers With Purpose and be a part of the industry transforming community.

• www.joinlwp.com

Victoria L. Collier, CELANational Expert and Trainer on VA Pension BenefitsCo-Founder, Lawyers With Purpose

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VA Proposed 3 Year Look Back

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