Friday, June 8, 2012

GAO recommends changes to VA Pension Eligibility Rules

Nearly two years ago this author warned veterans to be wary of veteran’s benefits planning companies. In my blog post of September 14, 2102 entitled Beware the Boondogglers selling Trusts for VA Pension Benefits, I noted that “[s]ome are operating in a manner similar to a living trust mill – for a couple of thousand dollars they will set up a trust for you (whether you need one or not)… As with many living trust mills, these outfits may sell high commission and inappropriate financial products (such as high commission annuities) in conjunction with the trust "planning"… A contemplated transfer to obtain VA Pension must be also evaluated for its impact on eligibility for Medicaid. VA and Medicaid rules differ markedly in their treatment of transfers of assets.”

At the request of Congress, the Government Accountability Office (GAO) has now conducted a study of veteran’s benefit planning companies and issued a report recommending substantial changes in the rules and procedures governing eligibility for VA Pension benefits. The GAO report, VETERANS’ PENSION BENEFITS: Improvements Needed to Ensure Only Qualified Veterans and Survivors Receive Benefits, was released to the public in conjunction with a June 6th U.S. Senate hearing.    
The VA pension program is intended to provide economic benefits to “wartime” veterans and survivors with financial need. In fiscal 2011, VA provided about $ 4.3 billion in pension benefits for about 517,000 recipients. These benefits are available to low-income wartime veterans who are age 65 and older, or who are under age 65 but are permanently and totally disabled as a result of conditions unrelated to their military service. Surviving spouses and dependent children may also be eligible for these benefits. As part of the pension program, VA provides enhanced pension benefit amounts to veterans and surviving family members who demonstrate the need for aid and attendance, or who are considered permanently housebound.

The GAO was asked to examine (1) how the design and management of VA’s pension program ensure that only those with financial need receive pension benefits and (2) what is known about organizations that are marketing financial products and services to enable veterans and survivors to qualify for VA pension benefits. GAO’s study included online research and interviews of organizations that market financial and estate planning services to help veterans and survivors qualify for VA pension benefits.

The GAO found that while the pension program is means tested, there is currently no prohibition on transferring assets prior to applying for benefits. It identified over 200 organizations located throughout the country that market their services to help veterans and surviving spouses qualify for VA pension benefits by transferring or preserving excess assets. These organizations consist primarily of financial planners and attorneys offering products and services such as annuities and the establishment of trusts, to enable potential VA pension claimants with excess assets to meet financial eligibility criteria for VA pension benefits. Between July 2011 and May 2012, GAO investigators spoke with representatives of 19 of the companies by telephone. Transcripts of several of these interviews are including in the report.

The GAO found that some of these companies were providing products and services like certain annuities that were potentially unsuitable for an elderly veteran and carried high withdrawal fees. It also appeared that many companies were unaware of or indifferent to the fact that their planning recommendations might result in an ineligibility penalty period for Medicaid benefits and create other problems for the veteran. 

The report notes that although planning techniques used by the companies doing VA benefits planning may be legal, they undermine the perceived goal of the VA pension system of aiding poor veterans while adding to the burden of federal spending at a time of deep budget cuts.  

The GAO concluded that “Congress should consider establishing a look-back and penalty period for pension claimants who transfer assets for less than fair market value prior to applying, similar to other federally supported means-tested programs. VA should (1) request information about asset transfers and other assets and income sources on application forms, (2) verify financial information during the initial claims process, (3) strengthen coordination with VA’s fiduciary program, and (4) provide clearer guidance to claims processors assessing claimants’ eligibility. In its comments on this report, VA concurred with three of GAO’s recommendations and concurred in principle with one, citing concerns about the potential burden on claimants and recipients of verifying reported financial information.

As a result of the report and related Senate hearing, we can expect the VA to revise its procedures manual to better define the concept of ownership and control and to specify when assets such as annuities and trusts should be counted as part of claimant’s net worth. In addition, Congress and the VA are likely to establish look-back and penalty periods for claimants who transfer assets for less than fair market value prior to applying for VA Pension (similar to those imposed by other means-tested programs like Medicaid and SSI). 

Hopefully these changes will be made in a manner that does not make it harder for truly qualified veterans to qualify for benefits or delay the payment of critically needed financial assistance.  

Update June 13, 2102: After the release of the GAO report US Senator Ron Wyden introduced a bill (S3720) to require the Secretary of Veterans Affairs to consider the resources of individuals applying for pension that were recently disposed of for less than fair market value, and for other purposes. 

S3720 would establish a look-back period of 3 years and impose a period of ineligibility of up to 3 years for asset dispositions by the veteran or spouse.  

For Further Information

Marshall Elder and Estate Planning Blog post: Beware the Boondogglers selling Trusts for VA Pension Benefits
For more information on current requirements for qualification for VA Pension see the Marshall Elder and Estate Planning Blog post Over age 65 and a Veteran? Don't miss out on VA Pension Benefits  


Sun Goog said...
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Ghayoor Abbas said...
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