airplane  Photo Credit: MicrosoftVery often, Veteran’s Administration benefits are overlooked, despite their availability for veterans and their families. All these people have to do is file an application, and yet many individuals are surprised when they learn that they are entitled to monthly payments.

A veteran must have served during a war and also must have served 90 days or more of active duty. War time includes but is not limited to the Afghan, Iraqi, or prior wars such as World War II, the Korean Conflict, Vietnam, Desert Storm, and Desert Shield. In addition, the veteran must have been honorably discharged or medically discharged.

The most popular benefit is one called Aid and Attendance. This is available to both a veteran and their surviving spouse. In order for the spouse to become eligible, they must have been married to the veteran as of date of death, and they may not have been remarried.

There are also asset and income tests to qualify for VA benefits, and at the time when  this article was written, there are proposed laws to limit the options for gift giving and transfer of assets in order to qualify for VA benefits. There are no laws in place as of now, but there are limitations on assets, excluding the value of one’s home, car, and certain other items.

In order to qualify for these benefits, a person must have income and assets under a certain level. One means of protecting assets is to make gifts to others; however, the recipient may not include someone who is also living in the home, because there is a VA rule that states that the assets of all individuals living in their home are counted. The veteran must relinquish and transfer all rights, including the right to receive any income from those assets, in order to make it an effective transfer.

The VA does not impose any transfer penalties, but when a transfer occurs, it will also be counted for Medicaid purposes, so it must be reviewed within the entire planning process. Keep in mind that once a transfer is made, the recipient now owns those assets and if that recipient gets sued, divorced, dies, or becomes disabled themselves, those assets may be used for that person’s care, and will not be available for the use of the veteran or their spouse.

Certain assets may be transferred relatively easily, but there are other assets that may have adverse consequences, such as an IRA or 401 K plan. In order for those assets to be transferred, they would have to be cashed in, and then the applicant would be taxed on all of the funds received, and only the net amount would be able to be be gifted.

If the IRA was converted into an annuity, then the stream of income would also be counted for VA benefits, and this excess income may cause a disqualification.

Of course, if a person needs certain things, such as renovations to a house to make it more accessible, new furniture, a new television, car, etc, these purchases are not considered to be disqualifying transfers, but merely an expenditure of funds for the benefit of the applicant.

There are many rules and regulations involved in the process of attempting to qualify for benefits, as well as exceptions. Most cities, towns, and states have veteran’s services offices that assist veterans and their families. They may also consult the Department of Veterans Affairs website. Also when consulting an attorney, make sure you speak with one who has an accreditation with the VA as a certified VA attorney. 

This post originally appeared on Bacon Wilson, P.C.'s blog entitled, "Estate Planning Bits."