Friday, July 31, 2015

Be Wary of Promotions for Veterans Benefits

If you’re a military veteran, you may have been offered free help in applying for pension or disability benefits. But be aware of the possible dangers of transferring assets in order to qualify for these benefits. The Federal Trade Commission warns of “dishonest advisers” who don’t provide the whole story.


If you’re a military veteran, you may have been invited to a seminar or seen ads promoting “free” assistance in collecting pension or disability benefits. But veterans’ pensions are only available to those who meet certain requirements, including having financial needs. The Federal Trade Commission (FTC) warns veterans about “dishonest advisers who are claiming to offer free help with paperwork for pension claims...[and try to] persuade veterans over 65 to make decisions about their pensions without giving them the whole truth about the long-term consequences.”

Specifically, these brokers—often an attorney, financial planner or insurance agent—try to convince veterans (or their surviving spouses) to transfer their assets to a trust or to invest in insurance products so they can qualify for pension benefits. While this is perfectly legal, what they don’t reveal is that these transactions could mean that the veteran loses eligibility for Medicaid services or commits to inappropriate or unwise investments.

However, there are many knowledgeable and trustworthy advisers to guide you in asset preservation and transfer strategies. You just need to carefully to choose an adviser who considers all program regulations, not just U.S. Department of Veterans Affairs (VA) benefits. Consult with your Certified Senior Advisor.

Because the issue of veterans’ pensions is confusing and fraught with possibly serious mistakes, the best advice is to seek out the guidance of a professional who not only works with the Department of Veterans Affairs (VA) programs but also is knowledgeable regarding Medicaid regulations in your state. In fact, as of 2008, a federal rule requires that anyone who assists a veteran or family member with the preparation, presentation and prosecution of a claim for benefits, needs to be accredited by and through the Department of Veterans Affairs (VA) before they can legally provide assistance.

Accreditation means that the provider is trained in how to fill out paperwork and file claims, and isn’t allowed to charge you to complete and submit your forms. To check if a person is accredited, you can go to the VA Accreditation Search .

Pension Benefits for Veterans

Many veterans may be surprised to learn that a military pension is not automatic but is intended for veterans and their families with financial needs. Likewise, some may not be aware that assistance is available for veterans struggling financially or with serious health problems.

Generally, a veteran must have at least 90 days of active duty service, with at least one day during a wartime period (such as World War II, the Korean or Vietnam conflicts) to qualify for a “non-service” pension (that is, a current disability is not related to wartime service). In addition, the veteran must meet one of the following requirements (Veterans Administration):
  • Age 65 or older
  • Totally and permanently disabled
  • A patient in a nursing home receiving skilled nursing care
  • Recipient of Social Security Disability Insurance
  • Recipient of Supplemental Security Income

Next, your yearly family income must be less than the amount set by Congress to qualify for the veterans’ pension benefit. If it is, your pension benefit is the difference between your “countable” income and the annual pension limit set by Congress. The VA pays this difference in 12 equal monthly payments. Countable income generally includes income from earnings, disability and retirement payments, interest and dividend payments from annuities and net income from a farm or business. Some expenses, such as unreimbursed medical expenses, may reduce your countable income.

It is important to note that although many veterans and/or spouses could not qualify based solely on income, once they factor in the unreimbursed medical expenses from nursing home care, assisted living or home care, they become eligible to pursue the pension. Talk to your accredited adviser about which costs the VA considers “unreimbursed medical expenses.”

Another factor is net worth, which includes assets such as bank accounts, stocks, bonds, mutual funds, annuities and any property other than your residence and a reasonably sized lot. Currently, the VA does not have a net worth limit, but the agency is proposing $119,220 (Medicaid's maximum community spouse resource allowance in 2015), which would include both annual income and assets (Houston Chronicle).

Currently, Forbes estimates that if you get down to $80,000 in assets—not including your house or car—and you have high-deductible medical expenses, you may qualify for a pension. A single veteran’s base maximum monthly benefit is $1,788 (tax free).

The pension benefit is also available to surviving spouses (who have not remarried) and children under 18. Generally, the same qualification conditions apply for spouses and children as they do for veterans. A surviving spouse’s base maximum monthly benefit would be $1,149 (tax free).

Additional Benefits

Qualifying veterans and survivors who require another person’s assistance or are housebound may be eligible for additional monetary payment. The VA pays these benefits in addition to the monthly pension. To receive the aid and attendance (A&A) benefit, you must meet these requirements:

  • You require another person’s help to perform personal functions necessary in everyday living, such as bathing, feeding, dressing or using the toilet.
  • Your disability requires you to remain in bed apart from any prescribed course of convalescence or treatment.
  • You are a patient in a nursing home due to mental or physical incapacity.
  • Your eyesight is severely impaired.

To be considered housebound, and eligible for an increased monthly pension amount, you must be substantially confined to your immediate premises because of permanent disability. 

Know What You’re Doing

In June 2012, the U.S. Senate Special Committee on Aging held hearings about marketing financial products and services to veterans to help them qualify for pension benefits. The committee learned that organizations may be charging substantial fees, ranging from hundreds to thousands of dollars, for products and services that may not always be in claimants’ best long-term interests. 

The problem is that some products and services, such as annuities, may not be suitable for elderly veterans who need money for care because they may not have access to all their funds within their expected lifetime without facing high withdrawal fees. Some annuities must be held for a decade or longer before they pay out a monthly income, and if the money is needed before that, high surrender fees apply.

Also, veterans need to be aware of the inherent risks of placing their assets in someone else’s name, such as a spouse or child. Potential problems arise in cases of divorce or a child spending the money. To make sure you’re protecting yourself and your heirs, consult with a qualified elder law attorney.

Moreover, these products and services may result in a temporary ineligibility for Medicaid. Medicaid has a 60-month look-back period: If you’ve moved substantial assets at less than market value during the previous five years, you may not be able to get Medicaid services when you need them. A veteran who is disabled enough to receive a VA pension will likely need nursing home care in five years, so he needs to make sure he is still eligible for Medicaid benefits. If you are going to transfer assets as a strategy to obtain veteran’s benefits, ensure your Medicaid benefits are protected.

The American Legion warns of a pension scam that offers to pay military retirees a lump-sum payout in return for their monthly retirement payments. These pension advances may pay only pennies on the dollar and can carry interest rates from 27-106 percent. Even though many of these companies have patriotic-sounding names and logos, beware of organizations that you find online and sound too good to be true.

VA Proposes to New Restrictions

To help discourage veterans from transferring assets when applying for pension benefits, the VA has proposed a 36-month look-back period on asset transfers. This would penalize transfers or gifts made in the three years before applying for benefits (Houston Chronicle). In addition to establishing a new combined net worth and income limit of $119,220, the new rules would limit the deductible amount of medical expenses.

The proposed rules have garnered criticism because asset transfer limits include gifts. Charitable veterans could face penalties for making a church donation or giving a grandchild a graduation gift. According to Forbes, “For a veteran who gave away $50,000, he would get a 28-month penalty. That is, he wouldn’t qualify for benefits for 28 months. A widow would be penalized for 44 months.”

Another problem is that a 36-month look-back period could add significant delays to an already-lengthy application process. Currently, the VA takes six to nine months to process a new application. If the VA has to start looking through three years of financial records for each applicant, veterans will likely wait even longer to begin receiving pension benefits.

Sources

“Elder Law: Department of Veterans Affairs proposes 3-year look-back for gifts,” March 17, 2015 Houston Chronicle

“Ask a Service Officer: Beware of VA pension scams,” April 1, 2014, American Legion

“VA Proposed Rule Is Attack on Veterans and Their Families,” Forbes

“Veterans Pensions,” Federal Trade Commission 


Be Wary of Promotions for Veterans Benefits  was featured in the June 2015 edition of Senior Spirit

Blog posting provided by Society of Certified Senior Advisors.