The VA is currenlty considering a rule to limit Veteran's Aid and Assistance eligibility. Now is the time to speak to me about a Vet's A&A Trust.

 

Veterans Pension Planning, often referred to as "Aid and Attendance," provides a monthly cash benefit to wartime veterans or the surviving spouse of a wartime veteran who meet financial and medical criteria.

To qualify for Aid & Attendance, you must also be eligible for a VA pension, a means-based program, which has the following five basic requirements:

 

1. The veteran must be age 65 or older, or permanently and totally disabled, not due to the veteran’s own willful misconduct. Note that there is no age requirement for a surviving spouse to qualify for widow’s pension;

 

2. The veteran must have been discharged from service under conditions other than dishonorable;

 

3. If the veteran entered active duty prior to September 7, 1980, the veteran must have served at least 90 days of active military service, one day of which was during a wartime;

 

4. Net worth must not be “excessive”,

  • Any asset or investment that could be easily converted into income might disqualify the claimant
  • Exempt assets generally include a primary residence, vehicles, and difficult-to-sell property

 

5. Countable family income must be below a yearly limit set by Congress. This program is intended for low income veterans and their spouses.

 

  • Your income also includes any money that is earned by your dependents as well as payments received for disability, retirement, dividends or interest. However, public assistance such as SSI or military retirement isn’t counted as pary of your income.
  •  
  • The "income" for Veterans Administration purposes (sometimes called IVAP or "adjusted income") is your household income minus your recurring, unreimbursed medical and long-term care expenses. These allowable, annualized medical expenses are such things as health insurance premiums, home care expenses, the cost of paying a family member or other person to provide care, the cost of adult day care, the cost of an assisted living facility, or the cost of a nursing home.

 

To reduce your net worth in order to qualify for Aid & Attendance, you can:

 

1. make a gift of “excessive” net worth to a relative or other individual who is not residing with the veteran or spouse.

 

2. purchase annuity.

 

Proviso: VA used to treat the income from single premium annuities as income for VA Purposes; however, recently many VA adjudicators have taken the position that certain annuities have cash value and countable as net worth.

 

or

 

3. transfer to irrevocable trust. The difference between an irrevocable trust and an outright gift is that the beneficiary of the trust does not own the assets until your death. That way, the principle can continue to produce income that can be used to make gifts to or to enhance the life of the veteran or spouse.

 

Considerations in Drafting Vet's A&A Trusts.

 

1. The Veteran, Spouse, or someone residing in same household may not be a beneficiary of the trust. The trustee will have absolute discretion to spend the trust income and principle. The trust is irrevocable. You can’t take it back, but you can appoint a Trust Protector to change the beneficiaries or trustees.

 

2. The trust cannot pass through its income to the Veteran or Spouse. The income tax rates for estates and trusts are very compressed. An estate or trust will hit the top 39.6% rate at only $12,400 of taxable income in 2016 and are also potentially subject to the 3.8% net investment income tax (on top of the above rates), depending on their income level and sources of income.

 

3. Transferring assets to the trust is a gift and requires filing a gift tax return. The good news is that no federal tax will be due on less than $5,454,000 (2016), and Rhode Island does not presently have a gift tax.

 

4. The trust will start the clock on the 60-month look-back period for Medicare eligibility. Because the Veteran or the Spouse might need to apply for Medicaid in the future—75% of A&A vets need nursing home care within 3 years of applying for A&A—it is extremely important to consider future Medicaid eligibility when transferring assets or converting assets to income in order to obtain eligibility for Veterans Aid & Attendance. If the Veteran or Spouse needs to be in a long-term nursing home within the 60-month look-back period, Medicaid may consider the trust assets as a “countable” asset and impose a penalty.

 

Today the VA has no look-back penalty for transferring assets as there is with Medicaid; however, the VA is currently considering a 36-month look-back period rule. Now is the time to set up a Veteran’s A&A trust.

 

 

Estate Planning &
IRA Beneficiary Trusts


I prepare all documents myself and am there to make sure the signing is done properly. Your file will never be handed off to a paralegal. I specialize in quality, not quantity.

Zona Douthit, Attorney at Law

Phone: (401) 305-8094
Fax: (401) 753-6303
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