Over the past few months, I have heard from a number of financial professionals whose clients are asking questions regarding eligibility for the Veterans Administration's Aid & Attendance Pension. The Aid & Attendance Pension is a benefit available to veterans with 90 days of active duty service during wartime. Due to the World War II, the Korean War, and the Vietnam War, the vast majority of military veterans potentially eligible for the Aid & Attendance pension served during a qualifying wartime. In addition to the wartime service requirement, veterans seeking the Aid & Attendance Pension must qualify medically and financially.
The Aid & Attendance Pension provides additional funds to veterans or their surviving spouses to pay for assistance in performing daily tasks. A significant goal of the Aid & Attendance Pension is to provide veterans with the care they need to live a full life without the veteran needing to rely on Medicaid for long-term medical care.
Clients who desire to meet the financial qualifications for the Aid & Attendance pension generally consider one of two actions. Either the client wishes to purchase annuities in order to convert assets into an income stream, or the client wants to give away assets to children or other loved ones. Both of these actions, while potentially allowing the client to meet those financial limits, have potential negative consequences.
Two issues arise for clients wanting to convert their assets into income. First, it is important to note that the Aid & Attendance Pension has both an income and asset limit, so it is possible that converting assets to an income stream will not achieve the goal the client intends. The second issue, involves the financial advisors desire to maximize their clients return on investment. In many cases, especially with elderly clients, an annuity is not the vehicle that will provide the best return on investment. Alternately, clients seeking to give away assets do not consider the choices that continued access to and control of those assets can provide the client.
Unlike Medicaid, the Aid & Attendance Pension has no divestment penalty, allowing individuals to give away assets in order to meet the financial qualifications. However, it is important for clients to consider what they are giving up by giving away those assets. When considering long-term care, more assets equals more choices. Also, while clients believe that children will retain assets given to them in case the parent ever needs those assets, even in situations where children have the best of intentions, unexpected expenses, lawsuits, and investment mistakes occur, creating a situation where assets are no longer available to pay for care in the future.
A significant drawback with the Aid & Attendance Pension is the existing backlog of claims for veteran’s benefits. In many cases, it may take over a year to process a claim for the Aid & Attendance Pension, and while the claim may eventually be approved and pay out retroactively, there is a time during which the client must subsist on their artificially lowered assets.
The Aid & Attendance Pension has the potential to improve significantly the client’s quality of life. However, qualifying for this benefit is not always in the best interest of the client, especially when the client has significant assets with which to pay for their care. Before taking any action designed to assist in qualifying for a government benefit, clients should speak with an attorney experienced in veteran’s benefits to ensure that such actions will achieve the client's goals.