Veterans Benefits Available to Help Cover Long-Term Care Costs

 In Long-Term Care Planning

The Veterans Administration (VA) may help cover long-term care costs either by providing care in its own facilities. In my area, the VA runs a highly-regarded Alzheimer’s care facility that is free to qualifying veterans, but there is only one in the region with a limited number of beds. It’s not clear to me how some clients have been able to get placement in the facility and others have not.

As a result, the primary benefit for assistance in paying for long-term care is an enhanced pension known as Aid & Attendance which (in 2016) pays up to $2,120 a month for care for married veterans and up to $1,149 a month for care for widows of veterans towards long-term care costs at home or in assisted living. Single veterans can receive up to $1,788 a month and a couple who are both veterans can receive up to $2,837. The benefit is unavailable to pay for nursing home care.

To be eligible, the veteran must have served during wartime, which includes World War II, the Korean War, the Vietnam War, both Iraq wars and the war in Afghanistan. Their assets other than their home may not exceed $50,000, though this is not a hard and fast number and can be somewhat higher according to an arcane formula. For a married veteran, this limit, as well as the income limits discussed below, applies to both spouses’ assets. As of this writing, the VA does not penalize transfers of assets, so veterans and their spouses can transfer assets to third parties to get below the $50,000 threshold. (However, they need to be aware that doing so could make them ineligible for Medicaid benefits for up to five year.)

The purpose of the Aid & Attendance benefit is to bring the veteran’s income up to the levels listed above after any medical and care costs. So, for instance, a veteran with income of $3,000 a month, but care costs of $2,000 a month will be deemed to have income of $1,000 a month for purposes of determining eligibility. So he’ll be eligible, but $1,000 will be deducted from his Aid & Attendance benefit. If he’s married, he’ll receive $1,120 a month from the VA. If he’s paying $5,000 a month for assisted living care, he will have negative income and receive his full Aid & Attendance payment.

As more and more veterans have become aware of this benefit, the application process has taken longer and longer with applicants waiting about six months to get a response as of this writing. However, once their applications are approved they receive retroactive payments back to the date of application. The other effect of the increased level of applications is that the VA has proposed regulations to limit transfers of assets to become eligible and clarify its treatment of property in trust. As of this writing, we are waiting for the other foot to drop on transfers and trusts.

Here’s how a typical senior couple might plan ahead to become eligible for benefits when the time comes. Meet John and Joyce Jorgenson:

Ten years have passed since John and Joyce Jorgenson created their estate plan. They are now both 70 years old, retired, and, unfortunately, John has been diagnosed with Alzheimer’s disease. John is a veteran.

Their financial picture now is as follows:

Income (annual)

John                 $25,000

Joyce               $20,000

Savings and Investments

Checking         $15,000

Savings            $25,000

Investments     $135,000

John’s IRA     $200,000

Joyce’s IRA    $125,000

Total                $500,000

House              $400,000 fair market value, no mortgage

While John is okay on his own for now, Joyce knows the writing is on the wall and that eventually she will have to begin hiring help or to move to an assisted living facility. She is heartened to learn that the VA might help pay for John’s care, but not until they have spent down most of their assets and John’s care expenses begin to exceed about $3,000 a month. To prepare ahead of time, she takes two steps. First, she transfers her savings to her children, who set it aside in a trust to be available for their parents when and if necessary. Second, she begins drawing down on her and John’s IRAs. Doing so, creates taxable income, but she’d rather stretch this out over several years than do it all at once, which would push her and John into a higher tax bracket.

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