I attended a delicious and informative lunch-and-learn event yesterday at the brand new Belmont Village Senior Living in Scottsdale. Don Smith, chartered financial consultant with Emerald Capital Preservation focused on the help that the VA offers war-time veterans who are no longer equipped to accomplish some of the activities of daily living.
Following the event I toured the assisted living and memory care facility with Millie Oakeson, community relations manager.
Don Smith specializes in assisted living financial planning, not only for veterans but for those who might qualify for Medicaid and anyone who needs to do estate planning and set up healthcare and financial powers of attorney. He’s a long-time member of the National Ethics Association.
He told us about the VA Aid and Attendance Program. Needs based, the application is paperwork-heavy, requiring a declaration of all assets.
“You are not automatically approved just because you are a veteran,” Smith told us. “But you can live in any retirement community, or even at home. You must have served at least 90 days active duty with one day during war time, though you needn’t have been in an actual battle. The criteria are to eliminate reservists from qualifying.”
The benefits are up to $1703 a month for veterans, which increases to a maximum of $2019 if married, depending on income / expense ratio. Widows or widowers of qualifying veterans would get up to $1094. Again, the actual amounts are determined by the individual’s ratio of income to expense. One really nice perk – the benefits are retroactive to the date of application. Approval averages four to five months.
Medical qualifications for the VA program are physical or cognitive impairment that keeps you from living independently – in other words, you need assistance with some of the activities of daily living. Perhaps you are falling a lot, or someone else needs to manage your medications, you’re in a wheelchair full time, you are legally blind, or you need help with a shower a couple of times and week and use a walker.
“You can stay in your own home and qualify, though you can’t just say, ‘my daughter lives in the basement and helps me’ and have that qualify you,” he said. “Money must change hands. It must be someone qualified, that you pay on a regular basis to help you.”
The financial qualifications are strict, though you can make changes to your finances to qualify as late as the day of (but prior to) the application. To qualify you generally can only have assets equal to one year of care costs minus any income you have. For example: if the cost of the care you need is $4000 a month, for an annual total of $48,000, and your income is $24,000 annually, you are allowed $24,000 (the difference between care cost and income) in savings without your being disqualified for the VA Aid and Attendance program. If you put your child’s name on your savings account the amount that you are allowed to have in savings without disqualification would probably double that figure – or $48,000.
Smith cautioned that should you apply for the VA program and be declined because of having too many assets (too much money) you might have to wait another 12 months after receiving your decline letter before repositioning your assets to apply again.
A veteran who has long term care insurance would need to spend down that coverage before the VA Aid assistance would kick in.
Smith encouraged us all to consider an irrevocable trust, if we needed to reposition funds for qualification. A revocable trust does not meet the criteria for qualifications because the applicant is able to revert that trust and access the assets. The assets in an irrevocable trust are not considered resources of the applicant, and if, for example, a child is made trustee and is sued for a car accident or other issue those trust funds are protected from any liability. Interest earnings on the assets in the trust are taxed to the trust and not to the children named as trustees
A Special House Trust puts the applicants house in trust and keeps the beneficiary from having to pay capital gains tax on it. The home that is in trust still may be sold, and the funds from the sale would be paid to the trust, to be dispensed for the veterans’ care needs. The applicant’s children could be trustees of the trust. While a home that still has a mortgage can be put into a Special House Trust,”the bank that holds the mortgage might not like it,” Smith said. “But they won’t know unless they do a title search for some reason.”
Smith also explained how married Medicaid recipients could qualify for the VA assistance. While someone single would realize a lien on her or his house, a married couple with only one needing skilled care would have the option of transferring assets. This could be done with the purchase of a Medicaid Compatible Guaranteed Income Annuity for the well spouse. The assets then become income for that well spouse, and any unused income at her or his death could be saved for future use or passed on to heirs. The exception to this inheritance would be if the recipient were still on Medicaid at the time of his or her passing. The balance would then be paid to the state.
Gifting for Medicaid for someone other than the applicant’s spouse is considered for five years, Smith cautioned.
“If your spouse is on Medicaid consider changing your will,” he said. “If the spouse inherits, the inheritable assets could lose her or him the Medicaid benefits.”
Smith talked about advanced directives and other financial cautions.
“If you are incapacitated your spouse cannot get into your IRA or 401(k) or even your bank account if it’s not joint with you,” he said.
He advised several things:
- Your Healthcare power of attorney must have HIPPA language; if written before 2003 it probably does not.
- Your bank account should have a POA (pay on death) provision, so that your executor (spouse, child, and so forth) is able to access the funds immediately.
- Your brokerage and other financial accounts should have a TOD (transfer on death) for the same reason.
- If you name someone as beneficiary on any account – life insurance, brokerage, 401(k) etc, and your will contradicts this inheritance, the beneficiary designation will supersede your will. If you are changing your will, don’t forget to change your beneficiaries to coincide.