While Medicaid eligibility is affected by gifts made within five years of application, the VA program known as Aid and Attendance does not currently penalize those who have gifted away their assets in order to qualify for the benefit. As we have reported in previous issues of this Newsletter, the VA has been considering a number of new rules including a three-year lookback on gifts. It now appears that the VA will publish new rules by February of 2016 which would create:
- A 36 month look-back period on gifts, and prohibit the use of trusts and annuities in VA planning;
- An ineligibility period for gifts made within the 36-month period. The penalty period is to be determined by dividing the amount transferred/gifted by the amount of pension the claimant would receive, with a maximum penalty period of 10 years;
- Change the definition of what are countable assets; and
- Place an hourly cap on care expenses of $22 per hour.
At this point we do not know how the proposed rules address a number of issues including: what constitutes a “countable asset” such as pre-paid funerals; whether approved benefits are grandfathered; and whether gifts made prior to the effective date of the new rules will be grandfathered.
Action Plan: The five-year lookback for Medicaid and the imminent three-year VA lookback dictate early gifting in order to protect your assets. We recommend you take a look at our lead article in the Spring 2015 newsletter entitled Create an Asset Protection Trust Before It’s Too Late!