Dept. of Veterans Affairs Publishes Final Rule for Needs-Based Benefits: Net Worth and Transfer Rules

Hook Law News | Oct 1, 2018 | Shannon Laymon-Pecoraro, CELA

The Department of Veteran Affairs (“VA”) has published a final rule relating to the needs-based VA pension benefit for veterans and spouses. The new rule, which was published on September 18, 2018 will be effective on October 18, 2018. I have previously provided a general overview of the proposed rule, and intend to dive into the new net worth and asset transfer rules imposed under the final rule.

Net Worth Limits

The final rule established a bright-line net worth limit for pension entitlement.  This is a drastic change to the prior methodology, which considered multiple factors and resulted in inconsistent results among similarly situated claimants.  The VA believes that the new bright-line net worth limit will provide uniformity in decisions and promote efficiency in claims processors.

When considering the net worth limit, the VA will consider the assets and annual income of the individual. In setting the net worth limit, the VA adopted the standard maximum Community Spouse Resource Allowance (“CSRA”) promulgated by Congress for Medicaid eligibility, currently $123,600, subject to a cost-of-living adjustment to account for inflation.  While the VA pension benefit is vastly different than the benefit provided under the Medicaid system, the VA determined that because Congress has established that individuals with a net worth beyond the CSRA are sufficiently protected from impoverishment for Medicaid purposes, that is was reasonable for the VA to conclude that individuals with a net worth beyond the maximum CSRA would also be sufficiently protected from impoverishment and would therefore not need the VA pension.

When calculating net worth, the VA will consider the income and assets of any child living in the primary residence. The VA will also consider the assets of a veteran and a spouse, even if the spouse and veteran do not reside together. The VA will also consider tangible personal property, except to the extent such property is suitable to and consistent with a reasonable mode of life (i.e.: appliances and family transportation vehicles).

In considering the assets and spend down, the VA liberalized the proposed rule by providing that a claimant may decrease assets by spending them on items or services for which fair market value is received. A claimant may not, however, spend down assets by purchasing items the VA would include as a resource, such as an expensive painting or gold coins. The VA has indicated that the purchase of a burial policy is a fair market value purchase.

Primary Residence Exclusion

The VA has excluded the primary residence and the residential lot area of 2 acres from the includable assets in the net worth calculation. The lot size may be larger than 2 acres if the additional acreage owned by the claimant is unmarketable, for example, if the property is slightly larger than 2 acres, the additional property is not accessible, or there are zoning limitations. Marketable acreage in excess of 2 acres will be included in the asset calculation.

If real property is sold after eligibility for benefits is established, the net proceeds from such sale will be an asset except to the extent the proceeds are used to purchase another residence within the same calendar year in which the sale occurred. A sale within three years of a claim can be used to purchase another residence at any point prior to the date of the claim, without penalty.

The VA failed to address how they will treat life estates, in particular if property subject to a life estate is sold.

Reducing Income

When calculating annual income, the VA will deduct projected unreimbursed medical expenses from income when the medical expenses are reasonably predictable.  I will discuss this in detail in the next newsletter.

Asset Transfers

The VA has imposed a 36-month look-back period, whereby, any assets transferred within such time for less than fair market value, defined as the price in which an asset would change hands between a willing buyer and a willing seller, taking into account best available information such as appraisals, will be subject to a VA imposed penalty period.

The purchase of annuities or transfers to trusts will be considered a transfer for less than fair market value unless the claimant retains control and the ability to liquidate.  If a claimant has such control, then the annuity or trust will be included in the claimant’s net worth.

An exception to the annuity policy is a retirement plan required conversion of deferred accounts to an immediate annuity. Under such a plan, the amount transferred to the immediate annuity will not be considered a transfer, but the distributions will be counted as income.

The VA is also excluding transfers to trusts created for the benefit of a child of a veteran who became permanently incapable of self-support prior to attaining the age of 18 years old. Note that a child of a spouse, and not of the veteran, will not be entitled to benefit from such a transfer.


The VA has implemented a penalty period calculation, which utilizes the Maximum Annual Pension Rate (“MAPR”) in effect at the time of the pension claim as the penalty divisor. The MAPR used will be at the aid and attendance level for the veteran with one dependent (currently $26,036 annually/ $2,169.67 monthly). The assets subject to the calculation will only be those assets transferred within 36 months of a claim that were in excess of the bright-line limit. The penalty period shall begin the first day of the month following the last asset transfer.

The VA will allow claimants 60 days following a penalty period decision to cure, or partially cure, a transfer and allow 90 days following a penalty period decision to notify the VA of the cure.

Ask Kit Kat – Tracking Poachers

Hook Law Center: Kit Kat, what can you tell us about how researchers are tracking poachers of elephant ivory?

Kit Kat: Well, I love it when science solves a problem! And it looks like this is another example of scientists coming to the rescue! Dr. Samuel Wasser, director of the Center for Conservation Biology at the University of Washington, and his colleagues have developed a map of African elephants’ territory by analyzing their scat (or droppings). The map details what types of elephants reside in each area of the continent. When the authorities or police find a tusk on the black market, the location of the elephant can be pinpointed, leading to better protection of the elephants that remain. It also can lead to catching the poachers. Just knowing exactly where they operate in a continent as large as Africa is helpful to police. It costs about $100 per tusk to perform the analysis.

This technique came just in time. It is estimated that poachers are killing 40,000 elephants every year. At that rate, we could see almost an extinction of these magnificent creatures. Northern Gabon in West Africa is a favorite of poachers. That country has lost 60% of its elephant population in the last eight years, according to John Brown, a special agent in the US Department of Homeland Security, who is involved in prosecuting ivory poachers.

What can the average person do to help reduce the number of elephant deaths—yes deaths, because the poachers kill the animals to get the tusks? The public can simply stop buying ivory, which come from the elephants’ tusks. Ivory is used for jewelry, figurines, and as aphrodisiacs. Some people even seem to be hoarding tusks and holding them, hoping their price will go up with time. At present, the sale of ivory is estimated to be a $4 billion business worldwide. Each person can simply stop the demand and dry up the market. Along with Dr. Wasser’s identification test, we now have a tool to assist in protecting these beautiful animals from needless slaughter. (Karen Weintraub, “Elephant Tusk DNA Helps Track Ivory Poachers,” The New York Times, Sept.19, 2018)

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