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For a veteran and / or their spouse to qualify for a VA Pension, such as Aid and Attendance (A&A) or Housebound, the applicant must meet certain eligibility criteria. One of these criteria is to have income within the VA's limits.
A veteran's income and the amount of pension in which they are due are linked together. For the Housebound and Aid & Attendance benefits, the VA decides the Maximum Annual Pension Rate (MAPR) that any veteran can receive. The veteran's actual payments are calculated by subtracting their income from the MAPR. For example, as of 2018, the maximum pension for Aid and Attendance for an elderly veteran is $21,962. If the veteran's annual income is $12,000, he / she would receive $9,962 in pension benefits. Make note, if one’s income is higher than the MAPR, one may still qualify for benefits. This is because unreimbursed medical expenses that are over 5% of one’s MAPR can be deducted from one’s income.
The good news is that the VA calculates income differently than the IRS. They allow many deductions (such as medical expenses, as mentioned above), and veterans can qualify for assistance even if their income is well over the limits published by law (see table below). It is not uncommon for households with a monthly income of over $6,000 to still be eligible to receive a pension. The bad news is that calculating and proving your income is confusing and complicated.
|2018 Housebound / Aid and Attendance Income Limits / MAPR|
|Family Status||Housebound||Aid & Attendance|
|Veteran without dependents||$16,089||$21,962|
In September of 2018, the VA released several new rules, all of which have an effective date of 10/18/18. One such rule establishes a net worth (asset) limit of $123,600 for VA pension eligibility purposes. (This figure is for both single and widowed applicants, as well as applicants who are married). Prior to this new rule, there was no clearly defined net worth limit.
Another of the new rules is related to the both the new net worth limit and an applicant’s income. One’s annual income, minus unreimbursed medical expenses over 5% of one’s maximum annual pension rate, must be added to one’s net worth. For example, say an applicant has $750 / month ($9,000 / year) in income and has unreimbursed medical expenses of $3,000. This means one’s income to be applied towards one’s net worth is $6,000. ($9,000 - $3,000 = $6,000). Now, say the applicant has $110,000 in assets. With the addition of the $6,000 in income, one’s net worth is $116,000.
A third new VA rule, also effective 10/18/18 is equally important to mention since income is now also tied to one’s net worth. This is a 36-month look back rule from the date of one’s pension application. In simple terms, one’s past asset transfers are reviewed for the 36-months immediately preceding one’s application. This is to ensure that the applicant has not given away assets or sold them for less than they are worth in order to meet the VA’s new net worth rule. If one is found to have violated this rule, there will be a period of VA pension ineligibility. Please note: Asset transfers made before the effective date of this rule, 10/18/18, will not be in violation of the look back period.
How the VA defines income when it comes to the veteran's benefit is different from how the IRS defines Adjusted Gross Income or Medicaid calculates Countable Income. In VA-speak, income used to calculate a pension benefit amount is called IVAP or Income for VA Purposes.
A veteran’s income, if married, is always calculated as household income, or said another way, the combined income of the veteran and his / her spouse.
There are two components to calculating Income for VA Purposes. First, one must consider the type of earnings to include in the household income (veteran and spouse if married). Then all sources of income will be added up to calculate the total annual household income. Second, it’s important to know what expenses can be deducted, effectively lowering the Income for VA Purposes. Expenses are discussed in depth in the next section of the page. The table below lists common income streams and whether or not they are counted for VA purposes.
|VA Pension Income Definition|
|Sources Counted as Income||Sources Not Counted as Income|
-Assistance Contributions from Non-Profits
The ability to deduct expenses when calculating Income for VA Purposes is the secret sauce to gaining eligibility for the VA Aid & Attendance and Housebound Pensions. In short, the VA allows applicants to deduct their unreimbursed medical expenses (UME) from their income. (As mentioned previously, UME’s over 5% of one’s MAPR can be deducted from one’s income.)
Keep in mind that the definition of unreimbursed medical expenses is very broad and is by no means limited to what we think of as “medical”, in the classic sense. In other words, it’s important to recognize that many non-medical care costs are deductible. Examples of UME’s might include Medicare premiums, supplemental health insurance, medical alert subscriptions, and care expenses. That being said, it is not inconceivable that a veteran and their spouse who have an annual income of $80,000 could still be eligible for financial assistance when all their expenses have been deducted.
For individuals with a disability rating for Aid and Attendance, the complete cost of assisted living, including room and board costs can be deducted from one's income. Given that the average cost of assisted living in the U.S. is $43,536 per year, this means couples with annual incomes over $68,000 (or even higher in some areas) are eligible for Aid & Attendance.
Home health care and non-medical home care (sometimes called companion care or personal care) are both fully deductible, as long as a physician says it’s necessary. This includes supervision of individuals with Alzheimer's or dementia to prevent wandering and / or self-injury. Family members, except spouses, can be hired as home care providers. More on hiring family is discussed further down this page.
Adult day care costs, both for adult day health and non-medical care, are fully deductible. At an average of $70 / day for 250 work days per year, this means an individual or spouse in full-time adult day care could subtract $17,500 off their annual income for VA purposes.
Medicare and Medicare Supplemental Insurance premiums can be deducted from income. Prescriptions, medical equipment, medical alert devices (PERS) be they purchased or rented, and supplies, such as disposable incontinence supplies can all be deducted. These are some of the non-obvious, unreimbursed medical expenses. Veterans should be sure to closely record all their out-of-pocket, household medical expenses including transportation and travel mileage and submit these as expenses.
Many people, and even some Medicaid planners, assume that planning techniques used to qualify for Medicaid will work for VA Pensions. This false assumption is likely made because generally speaking, Medicaid has stricter eligibility requirements than the VA Pension does. It is worth drawing attention to two strategies that will not work for VA Pensions.
1) Allocation of Joint Income to a Spouse - A&A and Housebound pensions consider household income. Medicaid might consider household income or it might consider income of the spouses independently if only one spouse is applying. Therefore, with Medicaid, one spouse can hold the income and the other spouse can qualify.
2) Qualifying Income Trusts (QIT) - Medicaid, unlike VA Pensions, is an all or nothing benefit in most states. If one meets the eligibility criteria, then they are in the program and receive full benefits. VA Pensions are distributed on a gradient. The lower the income, the more benefit the individual receives. With Medicaid, qualifying income trusts are used to lower one's income to a Medicaid eligible level. Were this technique used for a VA Pension, the VA Pension would only be increased by the exact amount the QIT lowered income. Therefore the net gain would be zero.
Undoubtedly, the best strategy to qualify for a VA Pension or to maximize the benefit amount is not a strategy at all, but a disciplined approach to paperwork. One should keep track of all the care and medical expenses incurred by members of the veteran's household. For any expense the VA may express hesitation, it’s important to have supporting documentation certified by a physician as to the need.
One also needs to know when and how to inform the VA of these expenses. For example, should one inform them at application, following an award of benefits, or during an annual verification. Finally, one must keep the VA well informed of any changes to the veteran's or their spouse's health, living situation, income, assets, and home ownership. Doing this well will ensure one receives the maximum benefit, and equally as important, prevent them from incurring penalties or having to pay back benefits.
Perhaps the most attractive and under-utilized component of the VA Aid & Attendance and Housebound pensions is the fact they can and should be used to pay family members or friends for the care they are providing the aging veteran or their spouse. How this works can be confusing.
1) A veteran hires their family member to provide care.
2) The veteran pays the family member and documents those payments as Unreimbursed Medical Expenses (UME).
3) These expenses are deducted (the amount over 5% of the maximum annual pension rate) from the veteran’s income. Therefore, their pension benefit is increased by the same amount they are paying their family member. By doing this, the family member receives compensation at no additional cost to the veteran.
As discussed above, the importance of providing supporting paperwork for this type of arrangement is paramount; Both for the reporting of the caregiver's income to the IRS and for reporting the care recipient's income to the VA. For the protection of all parties involved, it is strongly recommended that a caregiver contract be created. For more information about paying family members and how best to handle a caregiver contract, please contact a veteran's benefits planner.
A variety of different assistance options are available to help veterans and their spouses apply for VA pensions. Some of these are available free of charge, while others require a planning fee. A complete analysis of the pros and cons of each type of assistance is available here.