“How does the VA Pension help pay for assisted living?”
As we age, going to an assisted living facility can be an excellent choice with many advantages. But nothing is free in life so there is a cost.
The cost we’ll discuss in this article is the financial cost and how using the VA Pension (Aid & Attendance) can make this cost doable so you get all the advantages of an assisted living facility without the financial worry and stress.
“What does an assisted living facility cost in Alabama?”
Typically the range of monthly prices is at the low end $2500 all the way up to $10,000 for deluxe services and accommodations.
What is ordinary for our clients who are in assisted living is to pay between $3500 and $4,000 a month.
Do keep in mind this normally covers the following:
- Assistance with several activities of daily living (medication management, dressing, bathing, etc)
- Activities at the facility
- Local transportation usually by a van owned by the facility
So you can’t simply compare your mortgage payment to the assisted living monthly bill. When you are in assisted living, you normally won’t have any housekeeping costs, maintenance costs, homeowner’s insurance, grocery bills, etc.
But despite the above truths, we are still led to this question . . . .
“How do I pay for assisted living in Alabama?”
To make this example simple, let’s consider Betty who is a 75 year old widow. Her assisted living bill is $3,500 a month.
Her social security check is $1,400.
She gets a pension check from the state of $1000 a month.
So her monthly income is around $2,400.
But the monthly bill is $3,500 leaving her short about $1,100.
So what does she do?
- Pay the “shortfall” of $1,100 a month out of savings
- Transfer assets to more income producing — dividend based stocks/mutual funds, purchase the right type of annuity, etc. to make up this shortfall
- Use long term care insurance
- Have family make up this difference
- Or use the VA Pension (also called “VA Aid and Attendance”)
Let’s quickly look at the first four options.
Pay out of savings/investments: this will work but for how long? She’s losing $13,000 a year and healthcare costs will go up. This is an option but it may not be attractive especially since Betty, like most seniors, intended on leaving the most money possible to her children or grandchildren.
Change the nature of investments to produce income: this may work but it takes a tremendous amount of investments to generate $1,100 a month in additional income and there are taxes to take into account. An annuity can be an option but virtually all annuities (except those selected in elder law planning) do NOT comply with Alabama Medicaid and so can cause extreme problems if Betty ever needs nursing home care.
Use long term care insurance: this can be a great option but it does use up the limited amount of money that virtually all long term care policies have. Some older policies don’t allow the benefits to be used in any setting except a nursing home and the ones that do allow assisted living expenses to count may not pay enough. The policy needs to be examined to see exactly what it covers, when, and for how long.
Have family make up the shortfall of $1,100 a month: this can work if the family can afford this and if Betty does not mind asking her family for help. Most independent seniors like Betty do not want to go this route as their intention is to leave money to their family (children or grandchildren) instead of the opposite which is to ask their children (or grandchildren) to send money to Betty.
If these options are not available or not attractive to Betty, and if she knows about the VA Pension then she will check into this. Or her children will look into this to answer this question . . . .
“How does the VA Pension help me pay for my assisted living?”
The VA Pension pays money directly to you and the money is tax free.
Here are the rates for 2017:
Married Veteran — $2,127 a month ($25,000 a year)
Single Veteran — $1,794 a month ($21,000 a year)
Widow — $1,153 a month ($13,000 a year)
This money, paid every month can make it possible for you to get into an assisted living facility of your choice and to afford to stay in the facility where you already live.
“How do I know if I qualify for the VA Pension or Aid & Attendance?”
There are three tests or requirements:
- Military requirement
- Health/disability requirement
- Financial requirement
The veteran (whether still living or deceased) must have served active duty at least 90 days with one day during a time of war. Here are the times of war to qualify as a “war time veteran”:
- World War II – December 7, 1941 to December 31, 1946. (If in Service on December 31, 1946 with continuous Service before July 7, 1946, then this qualifies as wartime service.)
- Korean War – June 27, 1950 through January 31, 1955
- Vietnam War – There are two periods: For veterans who served in the country of Vietnam, the period is February 28, 1961 through May 7, 1975. This is sometimes called “in country” when the veteran was actually in Vietnam. For veterans who did not actually go into Vietnam, the time period is August 5, 1964 through May 5, 1975.
(We will talk in a separate article about the Gulf War which is defined as August 2, 1990 to the present. The length of time for active duty is different — typically 24 months or a full tour of duty — which is why this will be a separate article.)
It DOES NOT mean the veteran had to be in combat. The veteran could have been stationed in Alabama or anywhere else — the critical factor is to simply be active duty during the war. Those who actually served in combat deserve our special admiration but this benefit will help all veterans who were active duty during a time of war as all active duty personnel are critical to any war effort. You can read more about “War time veterans” in this article.
Now we look to the veteran (if living) or the widow and specifically we look to his or her health. Do they need help with activities of daily living such as dressing, bathing, going to bathroom, medication management, etc? To get the higher benefit levels described above then the veteran or the widow (surviving spouse) needs to require “aid and attendance” which is what an assisted living facility (not “independent” or “senior” living) provides.
There are two aspects to this.
The first is income and we look at the total income received in the household and then compare this to any unreimbursed medical expenses. This can include the total cost of the assisted living facility (but not independent or senior living).
So let’s go back to our example of Betty. Her income is $2,400 a month total but her assisted living bill is around $3,500. So she meets the income test (explained in more detail in this post on IVAP — Income for VA Purposes).
The second financial aspect is the asset or resource level of the veteran or widow. As a general rule we need these assets at least at $80,000 or below, not counting the house. If the assets are higher than allowed, then we need to lower the assets before we apply for the VA Pension.
Here are some steps or options with a short explanation:
- Assets can be transferred to the right type of “ir-revocable” trust that the VA recognizes so the trust owns the assets instead of whoever is applying for the benefits
- Assets can be given away to family members or others
- The right type of VA compliant annuity can be purchased which will turn excess assets into income (warning: very few companies sell annuities that the VA allows and also that Alabama Medicaid will accept without penalty)
- The assets can be “spent down” by paying debt, repairing the house, etc.
This planning process for dealing with excess assets is where a lot of families make costly mistakes so this is not an area to “do it yourself” or rely upon the assisted living facility to give you legal advice, especially since a non lawyer cannot (and should not) give you legal advice. Just like you shouldn’t get medical advice from a lawyer, financial planning advice from your bookkeeper, you should not get legal advice in this area from anyone except an elder care attorney.
If you are interested in this VA Pension then this question will arise in your mind . . . .
“What do I need to do now to get started on my VA Pension?”
First, gather information so you understand your options. Without doing this, it’s like driving with your eyes closed hoping you won’t have a wreck and will somehow, through luck, end up where you want to be.
Order your DD214 so you will have this.
Call an elder law attorney to find out your options — if you live anywhere in Alabama you can call us at 205-879-2447 as we represent veterans from all over the state.
Second, make sure you do something with the knowledge you gained — take the right action. If you don’t take action, then the knowledge is worthless. Its like sitting in your car, knowing where to go, but never pushing the gas pedal or turning the steering wheel. Does you no good.
So figure out if the VA Pension is a good option for you. If not, then take some other action that makes sense so you can accomplish your goal. If the VA Pension is the right action for you, then start the process. Move as quickly as you can but don’t make mistakes that can cost you dearly with the VA or with Alabama Medicaid. We will be happy to guide you in this process so you can discover the best path and option for you. Give us a call at 205-879-2447 or fill out our online contact form and we will be happy to help you right away.