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  • Navigating New Veterans Administration Pensions Changes for Disabled and Low-Income Clients

    Recent changes in Veterans Administration (VA) regulations (Veterans Administration Final Rule 8320-01 | RIN 2900-AO73) cause veterans who might not have needed a Special Needs Trust (SNT) to reconsider with new calculations for net-worth.

     Due to recent changes in Veterans Administration (VA) regulations (Veterans Administration Final Rule 8320-01 | RIN 2900-AO73), Veterans who might not have needed a Special Needs Trust (SNT) in the past might want to consider one now. VA benefits fall into two categories: Veterans Disability Compensation and Veterans Disability Pension.  Veterans Disability Compensation is for service-connected disabilities, and like Social Security Disability (SSDI) it is not means-tested; therefore, someone with this benefit does not need an SNT to protect that benefit. There are three types of VA pensions which are means-tested: Basic (Improved Income), Aid & Attendance, and Housebound. The Aid & Attendance and Housebound pensions require the Veteran have a disability to qualify, but the disability does not have to be related to his or her service. Because they are means-tested, the VA will consider the Veteran’s net worth (income and assets) when determining whether the Veteran qualifies.

    New Veterans Administration Regulations Change Calculations

    In October of 2018, several changes were made to the way the VA evaluates veterans for means-tested benefits. First, there is now a bright line net-worth limit. Previously the VA had essentially done a case-by-case analysis. They used a complicated formula, taking into account a number of factors to determine whether the Veteran qualified. Now that there is a specific number Veterans need to stay beneath in order to qualify, someone who previously qualified may no longer qualify, even if the VA previously determined the Veteran’s unique financial situation warranted the benefit. The VA does permit some excluded assets (such as a home) and the deduction of unreimbursed medical expenses. These medical expenses are now defined more broadly to include assisted living facility expenses, custodial care, and in-home supervision.

    Second, the VA has instituted a 36-month look-back period. Like Medicaid, if a Veteran transfers assets (through gifting, selling stocks for less than fair market value, etc.) in order to qualify for benefits, they could lose their benefits for a penalty period up to 5 years, depending on how much was transferred.

    What does this mean for Veterans with limited income? The bright-line asset test means it’s more important than ever to plan when a large sum of money is expected, whether through a personal injury settlement, inheritance, or any other increase in assets that could put the Veteran over the net worth limit. The look-back period means time is of the essence. Taking receipt of funds and deciding what to do with them later could have consequences that last for several years.

    Maintaining Veterans Administration pension benefits with Special Needs Trusts

    One option for ensuring funds will not count against the net worth limit is to place them in an SNT. SNTs have long-served individuals with disabilities and those with means-tested benefits.  An SNT’s primary benefit is allowing a person to maintain eligibility for benefits, such as SSI, Medicaid, or a VA Pension, without having to spend excess funds every month to stay below income or asset limits. This is particularly useful for someone with an injury settlement or inheritance who would otherwise be faced with either finding a way to get rid of the funds quickly, or be disqualified from benefits and have their funds drained away by the cost of private care. While an SNT is not quite the have-your-cake-and-eat-it-too solution it appears to be, there are many who would not be able to make ends meet without them.

    Like any trust, SNTs can be complicated to administer and may be quite costly with large banks. Many banks and trust companies also have minimum account sizes, which can cause headaches for someone who is going to receive enough money to disqualify them from benefits, but not enough to be attractive to a bank. Pooled trusts provide a solution to this problem by accepting smaller funding amounts and offering substantially lower fees because the costs of investment and management are shared across all the beneficiaries. This solution can be combined with an ABLE account, if the Veteran’s onset of disability occurred before age 26, to provide spending flexibility while maintaining the non-countable status of the assets.

    A further complication arises from how the VA views special needs trusts. In the past, the VA has found some SNTs to be a countable resource. Unfortunately, there are no statutes or administrative rules stating that special needs trusts are non-countable assets for VA purposes. Guidance on this matter comes from an opinion by the VA Office of General Counsel that distinguishes based on the rights of the beneficiary. If the beneficiary “owns” or can directly access the funds, or may otherwise compel the trustee to make distributions, the trust will be a countable resource. When the trustee is a close friend or family member, the line between a beneficiary’s request and the trustee’s discretion can be blurred, making the trust a countable resource; however, the VA’s rule can be satisfied by using a corporate trustee. Whether they are administering a standalone or pooled trust, a corporate trustee will utilize objective standards and policies to make decisions. This ensures well-informed decisions that are made with independence, prudent judgment, and in compliance with applicable laws. While this will be less convenient for the beneficiary, the benefits preserved may be well worth the lack of control and costs of administration. Ultimately, this decision is highly personal, and one that should be made only after careful consideration of all relevant circumstances and with the counsel of an attorney qualified to advise in this area.

    While changes to the VA’s policies may complicate matters for Veterans with a disability and low income, these changes are manageable with proper planning. Pooled Trust Services offers a pooled special needs trust that can be used anywhere in the United States for clients who are disabled and are receiving means-tested benefits. The Settlement Solutions National Pooled Trust (SSNPT) is a low-cost SNT solution, offering fees that are among the lowest in the country and no minimum account size.  Even though the cost is low, Pooled Trust Services offers world-class customer service and unique features.  For example, we partner with TEAM services for those family members who are being paid as caregivers.  This allows them to work on behalf of their family member yet have workers’ compensation coverage in addition to having payroll automatically handled. We also partner with True Link and STABLE (a national ABLE account provider) so that our beneficiaries of various trust solutions including Medicare Set-Aside accounts can access funds as quickly and easily as possible.

    Veterans Administration Final Rule 8320-01 | RIN 2900-AO73 was released on September 18, 2018, and is set to go into effect on October 18, 2018.

Testimonials

Many of my clients have joined or have helped a family member join the Settlement Solutions National Pooled Trust. My experience working with this pooled trust has always been very positive.

Derek B. Alvarez, Tampa, FL

The Settlement Solutions National Pooled Trust are user friendly, fast, efficient and most importantly cost effective.

Anthony F. Diecidue, Esq., Tampa, FL

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