Authored by Dale M. Krause, J.D., LL.M., of Krause Financial Services, Inc.
Veterans requiring long-term care may be eligible for a little-known government entitlement benefit called “Aid & Attendance” (“A&A”). Unlike the Medicaid program, which generally only pays for long-term care services provided in a nursing home, the A&A benefit can help those veterans, and their spouses, pay for long-term care services provided in the home or an assisted living facility.
To qualify for the monthly A&A pension benefit, the veteran or surviving spouse (hereinafter referred to as “claimant”) must have1:
- Served 90 days, or more, of active military service with at least one day during a wartime2;
- Received a favorable discharge – other than dishonorable;
- A permanent and total disability, and in need of daily aid and attendance of another person in order to avoid the everyday hazards of life;
- A ‘low monthly income;’ and ‘Nominal assets’ (low net worth).
With the first two qualifiers being easily understood, further clarification will be provided on the last three.
When is a Claimant Permanently and Totally Disabled and in Need of Daily Aid and Attendance?
If a claimant is blind, or residing in an assisted living facility or nursing home with a mental or physical impairment, the Department of Veterans Affairs (“VA”) presumes they are ‘permanently and totally disabled.’ For those claimants residing at home, the VA requires that the claimant’s personal physician complete VA Form 21-26803, entitled ‘Examination for Housebound Status or Permanent Need for Regular Aid and Attendance.” The VA will use the form to establish that the claimant is unable to perform activities of daily living and requires aid and attendance of another person in order to maintain a safe or protective environment.
What is a Low Monthly Income?
The VA uses the term IVAP, or “income for VA purposes.” IVAP is the difference between the claimant’s monthly unreimbursed medical expenses and monthly cash flow. The planning goal is to have an IVAP of zero dollars or less. In such a case, the claimant is eligible or the Maximum Annual Pension Rate4 (“MAPR”). Additionally, for every dollar greater than zero, the MAPR is reduced dollar-for-dollar until the claimant is no longer entitled to a VA benefit.
What Does it Mean to Have Nominal Assets?
There is no set limit on how much net worth a claimant can have, as long as it is not excessive. An excessive net worth is established when a claimant can pay his/her unreimbursed monthly medical expenses for the rest of his/her VA life expectancy. Many websites and publications advertising A&A benefits report that a single veteran with $50,000 of cash assets or a married veteran with $80,000 of cash assets can easily obtain A&A benefits. My opinion is that a veteran, whether single or married, should retain no more than $30,000 of cash assets. This amount is premised on the claimant “zeroing out” his/her IVAP prior to applying for VA benefits.
Why are Annuities Frequently Used in VA Planning?
The primary reason for using an annuity in VA planning is to convert excess net worth into a low monthly income. Whether the excess net worth consists of cash, checking and savings accounts, stocks, bonds, mutual funds, cash value life insurance, or an IRA, it can be easily converted into an immediate annuity.
1 Representing the Elderly Client 2010 Supplement § 6.05(H)(2)(b).
2 Official periods of war include: the Mexican Border, May 9, 1916, to April 5, 1917; World War I, April 6, 1917, to
November 11, 1918 (April 1, 1920, if served in Russia); World War II, December 7, 1941, to December 31, 1946; Korean
Conflict, June 27, 1950, to January 31, 1955; Vietnam War, August 5, 1964, to May 7, 1975 (February 28, 1961, if served in Vietnam); and Persian Gul War, August 2, 1990, to ‘date to be determined.’
4 This is the most that any claimant can receive, given his/her category: a veteran with a spouse, a single veteran, or a single surviving spouse of a veteran.