Differences in “Look Back” Period For VA Aid & Attendance and Alabama Medicaid

Most of us have heard at least something about a “look back” period where the government can see if we have given away assets in order to qualify for certain types of benefits.  If we have made improper transfers, we can be ineligible or face a penalty.  So what are the “look back” rules in Alabama Medicaid (paying for nursing home care) and the VA Pension (Aid and Attendance benefits of up to $2054 a month tax free)?

Why Would We Ever Give Or Transfer Away Money Or Property?

Both Alabama Medicaid and the VA Aid and Attendance programs offer enormous benefits but there are income and asset (net worth) requirements that you must meet to qualify for either program.

Well, what if you don’t meet those requirements?

You may be allowed to legally give away or transfer or spend down the assets to qualify.  As far as income, there are options to qualify as well.

Alabama Medicaid Has A 5 Year Look Back On Gifts And Certain Transfers

Alabama Medicaid will look back at the 60 months prior to your applying for Medicaid (and otherwise being qualified) to see if you made any transfers or gifts.  There are exceptions, but the general rule is that transfers for “less than the fair market value” may result in a penalty where your family will have to pay for the nursing home out of pocket.

So before you give away any assets or money, make sure that you sit down with an Alabama Elder Lawyer to find out if what you are planning on doing will hurt you down the road.  For example, many financial advisors will tell you that you can give away $14,000 a year tax free (it used to be $13,000 but that went up in 2013).  This is true for gift tax purposes but it may wreck havoc on qualifying for Alabama Medicaid.

The VA Has NO Look Back On Gifts Or Transfers

Unlike Alabama Medicaid, the VA does not have any look back period to see if you transferred assets in order to qualify for the VA Aid and Attendance (Special Pension) that can help war time veterans who have a non service related disability.

The VA makes the rules on who qualifies — for example if you only have 89 days of active duty you will not normally qualify but if you had 90 days of active duty you would.  Is this fair?  Well, it is the rule.

Same thing for tax deductions.  Why is mortgage interest expense or contributions to your church or charity deductible but not interest you pay on medical debt?  Lots of reasons but ultimately we follow the rules.

The VA does not have a look back period.  So you can transfer assets and make gifts and by doing this you may qualify for the VA benefits.

There are lots of strategies and each strategy has advantages and disadvantages to consider.  Before you apply for VA Aid and Attendance or make any transfers, again, sit down with an Alabama Elder Lawyer to find out your best options so that you make an informed decision.

How Do I Know Which Benefit To Apply For Or Whether I Should Give Away Or Transfer Assets?

Get with an Alabama Elder Lawyer to find out.  For one person, it may make sense to focus on Alabama Medicaid but the person the same age, with the same condition, next door might need to focus on Aid & Attendance.

For one family, it may be the best move is to put the assets in an irrevocable trust.  For the next family, making gifts to the children may make sense.  For another family, buying one or more annuities may be the key — especially with VA benefits sometimes it is best to take a lump sum of money (assets) and turn it into income by purchasing annuities.  Other times, we know of families that have been destroyed financially by annuity salespeople who put the family into the wrong product at the wrong time.

If you have questions, give us a call at 205-879-2447 or contact us online and we can sit down or talk by phone.  We normally have our mornings set aside from 9:00 to 11:00 to meet with families to discuss these types of issues as we know this is a stressful period and often times families are in a “crisis” mode trying to figure out what to do and who to trust.


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