Figuring Out VA Benefits and an Inheritance: Our Story

In my last story, I shared how my mother Ginny’s best friend had given her an unexpected inheritance gift. She should be receiving that gift soon, and we remain grateful.

It’s important, however, that we are responsible about how to manage the gift and dig into information regarding cash assets and how they relate, in particular, to her Veteran Administration benefit. It is critical for her not to lose it. If she were to lose that income, the inheritance would be consumed quickly. And in considering the possibility that she could lose it, we also have to keep an eye on applying for Medicaid. A weight of responsibility to figure this our correctly settles in on us.

I begin the search. In January 2015, the VA began the process of updating their eligibility requirements for their pensions and other needs-based benefit programs. After opening it to the public, they reviewed and analyzed almost one thousand comments about the old programs and took them into consideration before publishing the final eligibility rules and requirements in September 2018. The new rules went into effect October 18, 2018.

Similar to Medicaid, the VA has introduced a new “look back” policy. When applying for a VA program, they will look back at all asset gifting or transfers (under the fair market value) over a 36 month period. This is to prevent applicants from reducing (or hiding) their assets in order to qualify for a program.

Another new change is that they are using net worth instead of a household income cap, to determine financial eligibility. The maximum amount currently allowed is $127,061, however, this limit increases annually to match the CPI inflation percentage increase for Social Security.

Net worth includes checking, savings, and money market accounts, mutual funds, and stocks. Some assets are not counted towards the new net worth limit of $127,061, and include one’s primary home on up to 2 acres of land (acreage in excess of 2 acres will be counted towards one’s net worth), household goods, a personal vehicle, and personal items.

The American Council on Aging

This is interesting, and sounds promising. She holds few of the assets listed above and her inheritance will fall far under the specified dollar amount, but there are still questions. Ginny started receiving her benefit in 2017 before the new rules. How does that work? Do these new rules only pertain to new applicants? If so, then what is the cash maximum allowed in the old policy? (I keep thinking about Medicaid, and their cut-off for cash assets is $2000.00.) Do we need to give an update status to the VA? Will they now retroactively look at her?

My sister Hailey and I got together to discuss what to do. When the check arrives, we could let “sleeping dogs lie” and just move forward in ignorance. More than one person has suggested this approach, but I can’t do that. We briefly discuss placing the money in a separate account, but I explain that moving the money from her checking account soon after being deposited would be the very act we want to avoid. If there was ever a potential review of her assets, the removal would be obvious. There are penalties including an up to five year hold on any benefit.

I guess I want to take a moment to clarify why we are not including Ginny in these conversations, after all, it is her money. She is certainly aware of the gift, but doesn’t understand what we are looking into – the risk of any penalty or forfeiture of benefits and we want to keep it that way. Also, as I have mentioned, she often “lives in her head” and assumes everything will go well, the details being superfluous. We just do the “behind-the-scenes” work and explain it all after we have a plan.

I had been thinking about this a lot, and explained what I wanted. I wanted to have a conference call with the representative who initially helped us apply for the VA benefit. (There are senior care consultants for hire who provide homecare, advocacy, and nursing home placement.) If it was great news, the issue would be over and we would be free. If it was bad news, we would re-group. At least, we would have the facts.

About a week later, I was on a conference call with the rep, Hailey and my husband Dennis who is a retired financial consultant.

I explained that we had recently learned that Ginny would be receiving some money from a friend who had passed. She didn’t have it yet, but we shared the amount. Would it have a direct impact on her benefits? And if it did, what did we have to do?

“Well, for many years the VA guidelines have been somewhat unclear on assets for people applying for benefits” she began.

“That changed this fall. We received a list that clearly defines the VA benefits programs and their qualifications. It is really helpful. And they now do clarify that for the Aid and Attendance program, an applicant is allowed a maximum of $80,000 in assets including stocks, cash and so on. Your mother’s inheritance will fall under that so it will not affect her current status. There is no need to do anything.”

I’m ecstatic. Ginny was in the clear. I’m not sure how or if the new $127,061 net worth amount applies here, but it’s irrelevant. Her gift falls below both of the limits.

“Now, is she currently on the Medicaid list?” the rep asked.

“No, I remember you had a conversation with Hailey about a year and a half ago about placing her on the list, but you advised against it because mom was healthy enough that she would only get pushed farther and farther down it and that would ultimately work against her.”

“Ok. Does your mom have an attorney?”

“No” I replied. “There just weren’t any assets to warrant it.”

Hailey asked “will the inheritance affect applying for Medicaid?”

“At some point, if you are still considering Medicaid, you may want to find an attorney who can create a special needs trust for her. Or, you can spend it down first. How is your mom?” she added. She had met her during our initial meeting with the VA.

“She’s doing well, thank you.” I responded.

“Well, I’m happy to hear that.  Is there anything else I can help you with today?” she asked in conclusion.

I realize my concern about having to contact the VA or even care whether they will review old applications is also irrelevant.

“No, our main concern was the inheritance clashing with her benefit and it sounds like it will not. Thank you. This is invaluable information to us.”

With her vertigo issues and memory lapses, we suspect some type of independent/assisted living is in her not so distant future, and now she’ll have the financial ability to move towards that option without fear of penalty.

As I end the call, the weight begins to lift.

Money

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