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Pending Benefits Legislation, Part 1

Pending Benefits Legislation analyzed by the National Academy of Elder Law Attorneys.

The National Academy of Elder Law Attorneys (NAELA) have provided valued input to the Government Accountability Office (GAO) and Consumer Financial Protection Bureau (CFPB) regarding their efforts to combat fraud, misinformation, and the use of inappropriate services and products for veterans.

NAELA has analyzed S. 748, the Veterans Pension Protection Act, and believe the bill currently fails to address areas of concern raised during the GAO report. In addition, they have doubts of the Department of Veterans’ Affairs ability to administer a look-back period without further delaying the already lengthy wait time and complex VA application process.

There testimony consists of three primary areas:

1. Concerns with S. 748 and Proposed Changes

2. Accreditation for Representation of Veterans and Proposed Solutions

3. How Gray Areas in Existing Pension Rules Attract “Scammers” and Proposed Solutions

Concerns with S. 748 and Proposed Changes

In April of 2013 a bill was introduced to establish a three-year lookback period for the VA Aid & Attendance pension program and to create penalty period for assets transferred in this span.

Congress should not introduce unnecessary obstacles and delays at the cost of veterans and their families by preventing them from seeking the type of planning needed to ensure the future security of themselves and their family.

It is NAELA’s belief that if a lookback period of any time frame is implemented then a number of problems will arise. To address these problems, NAELA has drafted changes to the current legislation to better protect veterans and their families.

Implementation

A lookback period of any length will increase the severity of the backlog problem and unfairly punish veteran while preventing them and their families from accessing their rightful pensions.

NAELA’s proposed modification to the bill includes protections for veterans if a lookback period is implemented. They call for a “Timely Determination of Eligibility” section where a claim for improved pension must be decided within 90 days (and 180 days for all other claims). Additionally, NAELA would add a section to the bill explaining that the veteran has a duty to disclose fully and adequately relevant information.

Penalty Period Calculation

The legislation would create inequity with the application of the penalty period, when the veteran would not be eligible to receive benefits. NAELA’s proposed amendment to the bill recognizes “partial returns.” If an individual transfers assets for less than fair market value and a portion of those assets are returned to the individual, the individual’s penalty period should be reduced by the proportion of the assets returned. A partial return should be a “cure” of a penalty, and no new penalty should be recalculated.

For example, if a veteran transfers $10,000 to a child as a gift and the child spent $5,000, only $5,000 can be returned to the veteran in an attempt to avoid a penalty period. It is unfair to impose a full penalty of $10,000 on the veteran if the child returns $5,000 of the gift. An all or nothing rule on returns actually discourages partial restitution of funds.

It seems that the legislation creates a disparity in the application of the penalty period between single veterans and married veterans,as well as between veterans and surviving spouses and dependent children of veterans. The maximum pension rate for each type of claimant (i.e. single, married, veteran, or surviving spouse) is different, thus, creating a longer penalty period for certain claimants versus others, even though the amount of the transfer was the same.

For example, if a veteran gives his son a gift of $10,000 and then applies for pension benefits, he would be assessed a penalty period of ten months ($10,000 divided by $1,038). If the veteran’s surviving spouse gave her son a gift of $10,000 and then applied for pension benefits, her penalty period would be fourteen months ($10,000 divided by $696).

The legislation provides that if the veteran’s spouse makes any gifts during the veteran’s lifetime, the penalty is to be assigned to both the veteran and his spouse and such penalty survives the death of the veteran.

NAELA would change the method of calculating the penalty period to better reflect the cost of long-term care for veterans and their families. NAELA suggests that the value of all covered resources disposed of by the veteran should be divided by the greater of either twice the amount of improved pension or the national average cost of care. This would decrease the devastating financial impact of a penalty period and reflects the reality that veterans will have to pay for the cost of care during the penalty period.

They believe this change will decrease the impact on veterans and their families because the cost of long-term care is a major element of eligibility for the VA pension benefit. This benefit helps elderly and chronically ill veterans and their families pay for much-needed long-term care.

In order to be eligible for the full pension benefit of $1,038 per month, a veteran needs to have a monthly income of $0 or less. The VA regulations provide that unreimbursed medical costs (such as the cost of long-term care) can be subtracted from the gross income for “income for VA purposes.” By tying the penalty period to the cost of care, rather than the amount of the monthly benefit, which other benefits programs such as Medicaid already do, the penalty period reflects the basic reality that the vast majority of those eligible are only eligible because they have significant care costs. This change will protect veterans because the national average cost of care is much higher than the pension benefit.

Lack of Clarity and Guidance

It is their contention that the current draft of S.748 lacks adequate clarity and guidance on the treatment of trusts and annuities when determining the veteran’s net worth.

In order to protect veterans and their loved ones, NAELA identifies certain transfers that should be exempt from penalty. Transfers made for fair market value or for other valuable consideration are exempt. Also exempt are transfers made exclusively for a purpose other than 6 to qualify for benefits.

Their proposal includes a non-exhaustive list of transfers that are presumptively transfers for a purpose other than to qualify for benefits, such as:

  • To help a family member pay for education expenses, medical expenses, for a financial crisis;

  • To contribute to a religious organization or charity;

  • Transfers resulting from alleged financial fraud or abuse against the claimant;

  • Transfers made by individuals with dementia who are unable to provide documentation or explanations of the transfers;

  • Transfers made to a third party solely to benefit the veteran’s spouse.

NAELA’s approach allows for the recognition of special needs trusts to help protect the veteran’s family members who have a disability. For example, a disabled child in the veteran’s household can receive Medicaid and have a special needs trust to improve the quality of the child’s life, but currently, the assets in the special needs trust would count against the veteran’s ability to obtain needed assistance from the VA.

The suggested changes also help protect veterans and their families by exempting Medicaid Compliant annuities as an asset. A Medicaid-compliant annuity has no cash value, but is a source of income the veteran can use to pay for the cost of long-term care and delay the need for Medicaid. This change will help delay or even avoid the need for veterans and their spouses to receive Medicaid covered nursing home care — ultimately saving significant costs for the Federal government as a whole.

As it stands, the draft of the bill fails to include important definitions that would help veterans and their families adequately plan for their long-term care needs. NAELA’s suggests adding a definition section to the bill that would include definitions for fair market value, resources, disabled, trust, annuity, and transfer.

Veterans and their families deserve protections from unjustifiably harsh eligibility restrictions.

NAELA’s suggestions to the bill work to correct the current problems in the legislation and are necessary if a look-back period of any length is instituted.

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