In the past I’ve suggested that older veterans need to be cautious when someone offers to help them secure VA Pension related benefits through the purchase of an annuity or a trust. See: Beware the Boondogglers selling Trusts for VA Pension Benefits.
The VA Pension program provides basic income security to “wartime veterans” who are over age 65 or who have been disabled (unrelated to their military service) and who have limited means to provide for their own support. The periods of “wartime” are very broadly defined so today’s older veterans usually fit.
Pension can provide additional income so that an older veteran (or the surviving spouse of a deceased veteran) can pay for critically needed health and long-term care services. It can mean that the veteran can stay at home and not be institutionalized. Or it can help pay for care at an assisted living facility.
The intent underlying the VA Pension program is to ensure that our disabled and older veterans who honorably fought for our nation will never live in poverty. It is an expression of our nation’s gratitude to our veterans.
Veterans have to know about the Pension program and apply for it before they can receive benefits. Elder Law attorneys, Veterans Service organizations, County Service Officers and Directors of Veterans Affairs, work to alert older veterans to the existence of the Pension program. Nevertheless, many qualified veterans remain unaware of their potential Pension benefits, which thus go unclaimed.
Over recent years unethical “advisors” have taken advantage of this information gap by selling high fee services and products to older veterans without providing accurate information about the potential consequences. Veterans who reside in assisted living facilities are frequent targets.
Recently the Federal Trade Commission issued a new warning about the problem. In a recent posting on its website it notes that
unscrupulous brokers try to convince veterans to transfer their assets to a trust or to invest in insurance products so they can qualify for Aid and Attendance benefits. What they don’t reveal is that these transactions could mean that the veteran loses eligibility for Medicaid services or loses the use of their money for a long time. Adding insult to injury, the advisers are charging fees that range from hundreds to thousands of dollars for their services. See Veterans’ Pensions Protect Your Money From Poachers.
The “Aid and Attendance” (A&A) referred to by the FTC is a supplement which increases the Pension amount for qualified veterans who are in need of the aid and attendance of another person. See 38 U.S.C. Section 1521(d).
The FTC provides the following useful description of the trust and insurance/annuity schemes:
The so-called advisers offer to help you complete the paperwork to file your benefits claims. If your assets are above the required threshold, their goal is to convince you to restructure your finances so you can qualify for A&A. That’s how they earn their money: by selling you an annuity or creating a trust. For instance, the more money you put into certain insurance products, the more money the insurance adviser gets paid.
Here’s what you need to know:
Transferring assets. Under current rules, it is not illegal to shift your assets to family members or to a trust to make you appear needy and qualify for Aid & Attendance benefits. But transferring assets can have serious consequences: it can disqualify you for Aid & Attendance benefits rather than qualify you. If disqualified, you would be required to return any Aid & Attendance benefits already paid to you. Also, Aid & Attendance benefits may not be enough to fund your long-term care expenses, and you may need to apply for Medicaid, the government’s program for people who cannot afford medical care. But Medicaid has a 60-month look-back period: If you’ve moved substantial assets at less than market value during the previous five years, you may be ineligible for Medicaid services.
Annuities. If you buy an annuity, you pay a premium and then you get regular payments over time from an insurance company. People often use annuities to provide a steady stream of income. But depending on the annuity, if you need money early and have to withdraw it, you may have to pay very high fees. Annuities aren’t right for everyone: their suitability depends on your age, needs, and particular situation. For more information about deciding whether an annuity is right for you, visit the National Association of Insurance Commissioners.
It is important to understand that trusts and annuities are not always bad. They can be useful planning options for some seniors in some situations. But, if appropriate at all, trusts and annuity purchases need to be implemented as part of a comprehensive plan that takes account of factors such as the veteran’s possible need for liquid funds and Medicaid benefits.
If you are approached about setting up a trust or buying an annuity to qualify for VA benefits, I suggest you get a second opinion from a lawyer who is experienced in long-term care planning. Get the big picture before you sign anything.
For some ideas about how you can find a lawyer see my recent posting: How to Find a Good Lawyer for Older Adult Issues.
