Long Anticipated Changes for VA Rules Arrive

Posted on: Wednesday, September 19th, 2018

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Clients who have served in the military and face the prospect of needing long term care for themselves or their spouse, often have questions about benefits available through the Veterans Administration (“VA”). Often these discussions center around what are commonly referred to as the VA Pension Aid & Attendance (“PAA”) benefits. For certain veterans, and their spouses, this benefit can provide extra income to help with the cost of care in the home, or in an institutional setting.

But, as with any government program, eligibility for the PAA benefit is complicated. In addition to rules relating to the nature of their military service, there are financial eligibility rules that look at the income and assets of the applicant. Recently, the VA announced significant changes to these rules, including the rules related to how the asset limit is calculated, what is included in the “homestead exemption,” and rules that impose penalties if people transfer or give away assets in an attempt to become eligible.

The new rules discussed below are scheduled to take effect October 30, 2018.

New Asset Limit Rules

PAA eligibility limits the amount of assets an applicant can own (excluding their house and car). Before these changes, the asset limit for PAA was based on a complicated formula that looked at the applicant’s net worth, life expectancy, income and expenses. With these changes, the asset limit will be much easier to apply. To qualify for PAA benefits, an applicant will have to have no more than $123,600.00 of countable assets. Each year that number will be adjusted upwards based on the cost of living.

Homestead Exemption

PAA has always excluded the primary residence of an applicant from the net worth calculation. For the first time, the VA is putting a limit on what will qualify for an exempt homestead. The new rule regarding the house is that the house will be excluded along with the surrounding land up to 2 acres. Any land in excess of two acres will be counted as part of the net worth.


The term “divestment” refers to giving assets away, or taking steps to make assets unavailable, in order to become eligible for the benefits. VA has not had a divestment rule or penalty in the past, so people seeking benefits have sometimes transferred assets, or put assets in a trust, to gain eligibility. Under the new rules, VA will institute a three year “look back” period, meaning they will review any transfers within the three years prior to applying for benefits. If there are such transfers, a penalty period will be applied during which the applicant will not receive PAA benefits. The length of the penalty period will be based on the value of the assets divested. The more divested, the longer the penalty, but no penalty will exceed five years. The penalty period will start on the first day of the month that follows the last asset transfer. Placing assets in an irrevocable trust or purchasing annuities will be reviewed as divestment.


Despite these rule changes, the PAA will remain an important benefit for older veterans and their spouses. Veterans and their spouses should always explore benefits available to them based on their service. But they should be cautious about where they get their information. It is clear that the VA has adopted many of these new rules in reaction to the fact that some lawyers and “financial advisors” have promoted strategies which they claim are designed to help veterans qualify for the PAA benefit, but which strategies are not always in the veterans’ best interests.

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