VA Aid and Attendance Net Worth and Asset Transfer Regulations
On September 18, 2018, the Department of Veterans Affairs (VA) published its final rules amending 38 CFR Part 3, regarding net worth, asset transfers and income exclusions for needs-based benefits. These new regulations will become effective October 18, 2018 and will not apply to transfers made prior to October 18, 2018.
This article provides an overview of the changes made by these regulations. The regulations can be found at:
https://www.va.gov/ORPM/docs/20180918_AO73_NetWorthAssetTransfersandIncomeExclusionsforNeedsBasedBenefits.pdf
§ 3.271 Computation of income
Waiver of receipt of income: Potential income that is not excludable under § 3.272 or § 3.279 but is waived by an individual is included as countable income of the individual.
§ 3.274 Net worth and VA pension
Net worth limit. For purposes of entitlement to VA pension, the net worth limit effective October 18, 2018 is $123,600. This limit will be increased by the same percentage as the Social Security increase whenever there is a cost-of-living increase in benefit amounts payable under section 215(i) of title II of the Social Security Act (42 U.S.C. 415(i)). VA will publish the current limit on its website at www.benefits.va.gov/pension/.
Net worth. Net worth means the sum of a claimant’s or beneficiary’s assets and annual income.
Example of net worth calculation:
For purposes of this example, presume the net worth limit is $123,600. A claimant’s assets total $117,000 and annual income is $9,000. Therefore, adding the claimant’s annual income to assets produces net worth of $126,000. This amount exceeds the net worth limit.
§ 3.275 How VA determines the asset amount for pension net worth determinations
Assets. The term assets means the fair market value of all property that an individual owns, including all real and personal property, unless excluded under paragraph (b) of this section, less the amount of mortgages or other encumbrances specific to the mortgaged or encumbered property. VA will consider the terms of the recorded deed or other evidence of title to be proof of ownership of a particular asset. See also § 3.276(a)(4), which defines ‘‘fair market value.’’
§ 3.276 Asset Transfers and penalty periods
Covered asset means an asset that (i) Was part of a claimant’s net worth; (ii) Was transferred for less than fair market value; and (iii) If not transferred, would have caused or partially caused the claimant’s net worth to exceed the net worth limit under § 3.274(a).
Transfer for less than fair market value means—
(i) Selling, conveying, gifting, or exchanging an asset for an amount less than the fair market value of the asset; or
(ii) A voluntary asset transfer to, or purchase of, any financial instrument or investment that reduces net worth by transferring the asset to, or purchasing, the instrument or investment unless the claimant establishes that he or she has the ability to liquidate the entire balance of the asset for the claimant’s own benefit. If the claimant establishes that the asset can be liquidated, the asset is included as net worth.
Examples of such instruments or investments include—
(A) Annuities. Annuity means a financial instrument that provides income over a defined period of time for an initial payment of principal.
(B) Trusts. Trust means a legal instrument by which an individual (the grantor) transfers property to an individual or an entity (the trustee), who manages the property according to the terms of the trust, whether for the grantor’s own benefit or for the benefit of another individual.
Look-back period means the 36- month period immediately preceding the date on which VA receives either an original pension claim or a new pension claim after a period of non-entitlement. This definition does not include any date before October 18, 2018.
Penalty period means a period of non-entitlement, calculated under paragraph (e) of this section, due to transfer of a covered asset.
Penalty periods and calculations.
When a claimant transfers a covered asset during the look-back period, VA will assess a penalty period not to exceed 5 years. VA will calculate the length of the penalty period by dividing the total covered asset amount by the monthly penalty rate described in paragraph (e)(1) of this section and rounding the quotient down to the nearest whole number. The result is the number of months for which VA will not pay pension.
Monthly penalty rate. The monthly penalty rate is the maximum annual pension rate (MAPR) under 38 U.S.C. 1521(d)(2) for a veteran in need of aid and attendance with one dependent that is in effect as of the date of the pension claim, divided by 12, and rounded down to the nearest whole dollar. The monthly penalty rate is located on VA’s website at www.benefits.va.gov/pension.
