What If I Do Planning For VA Pension But Then Need To Go To A Nursing Home?
What If I Do Planning For VA Pension But Then Need To Go To A Nursing Home?
Often it is necessary to do VA Pension planning by transferring assets to a special type of trust so you can qualify for the VA Pension (Aid & Attendance).
One consequence is this will trigger a Medicaid penalty if you apply for (and are otherwise qualified) Alabama Medicaid within 5 years of the transfer.
As we have discussed elsewhere, there is a 5 year “look back” period for Alabama Medicaid.
It looks to see whether you have made any gifts to a person or trust or anyone else in the last 5 years.
(There is no look back period for VA Pension — although Congress is trying to change this now).
If you have, there is a penalty period where Medicaid will not pay for your nursing home care.
So what to do?
Every situation differs so you need to get personalized advice but here are some general thoughts.
First, remember that your VA Pension benefits will help you pay for the nursing home care.
Let’s say your income (social security, etc) is $3,000 a month and you are a single veteran who is receiving $1,700 a month from the VA Pension.
You then need to go into a nursing home which costs $6,000 a month.
Your “shortfall” will be $6,000 – $4,700 which is $1,300 a month.
This is a problem that must be dealt with — keep in mind that going to a nursing home is difficult for any family. Tough financial choices must be made.
But let’s assume to qualify for the VA Pension — which has been paying you $20,000 a year — you had to transfer $150,000 into a trust a year ago.
Second, remember that the assets you transferred to the trust are available for your family to use to help pay for your care.
You have received an extra $20,000 a year in VA Pension benefits.
The trust has $150,000 in it.
The $1,300 shortfall — about $16,000 a year — can be pulled from your VA trust.
Assuming you set it up a year ago, your family will need to pull money from the VA trust for the next 4 years before you can qualify for Medicaid without any penalty (assuming no other gifts).
So pulling about $16,000 a year for four years equals about $64,000 pulled from the trust.
Even though you unfortunately had to go into a nursing home so soon after doing VA planning — which is unusual — you still ended up saving a large amount of your money.
If you had not done the VA planning, you would not have received the VA Pension and the $150,000 would have been used — at least in large part — for the nursing home bill before Medicaid would step into the picture.
Third, you can always have the gift returned to you in full before you apply for Alabama Medicaid and then you will have this money available and you may be able to save some or all of this from being spent on the nursing home bills.
Alabama Medicaid does allow, in many circumstances, you the ability to receive the gift back and then qualify for Alabama Medicaid.
So if you need to, your family could return the gift from the trust to you.
Now you still have to qualify for Medicaid and this may mean spending down a good amount of the $150,000 (different rules based upon whether you are single or married, etc) but this is an option for many families.
Conclusion — find out your options and then make the best choice for you.
We have no guarantees in life.
So, we buy insurance that we hope we will never need.
We get on the roads and don’t know if there will be a drunk driver that hits us.
So what do we do?
Nothing?
No — that is no solution. Instead we find out all we practically can and then we evaluate our options. Then we make a decision.
If you are in a situation of facing choices on how to plan for long term care — be thankful.
Be thankful that you have choices.
Let us know if you would like us to sit down with you.
We can have a “no pressure” setting and discuss your options with you.
It may be you should do planning.
Or maybe you should not.
In either event, I think you will enjoy finding out your realistic options and then making a decision.
When we make decisions we get peace of mind.
Call us at 205-879-2447 or contact us through this website.
Either way we look forward to hearing from you.
Thanks for reading, and have a great day!